Katrina Group - CIMB Research 2016-10-13: Specialising in multi-cuisine concepts

KATRINA GROUP LTD. 1A0.SI

Katrina Group - Specialising in multi-cuisine concepts

Katrina operates chains of restaurants and cafes in Singapore and Beijing, China.
Katrina reported 15% yoy growth in 1HFY16 revenue but a 34% yoy drop in net profit post-IPO in Jul 2016.
Management expects to remain profitable in the next 12 months.

According to its IPO prospectus, Katrina intends to pay out 60% of its net profit as dividends in FY16F.

On 12 Oct 2016, we visited Katrina Group Ltd (“Katrina”), an operator of restaurants and cafes. Katrina owns and operates restaurants under nine different F&B brands. Each brand provides different dining options to cater to a wide spectrum of patrons and different market segments. Its restaurants are located in Singapore (32) and Beijing (2), China.
Katrina has also launched its own customised online food ordering and delivery system.

Post-IPO, Katrina reported that 1HFY16 revenue rose 15% yoy but that net profit fell 34% yoy. Katrina attributed the growth in revenue to contributions from five new outlets opened in 2H15.
Sales and distribution costs also rose due to marketing and promotional expenses to create awareness of the launch of its online ordering service.
There was also a one-off IPO expense of US$0.4m.

Management highlighted that the F&B industry has always been highly competitive as entry barriers are comparatively low. The group’s strategy is to continue opening and operating new restaurants under its various proprietary brands, including halal-certified brands.
The group is also on target to expand its online food ordering and delivery services to more of its brands.
Barring any unforeseen circumstances, management expects to remain profitable in the next 12 months.

Katrina was in a net cash position in FY13-15, as well as in 1HFY16. According to its IPO prospectus, Katrina intends to recommend and distribute dividends comprising at least 60% of its annual net profit attributable to shareholders of the company in FY16F.
Katrina highlighted that its intended dividend payout will be subject to its financial performance and growth opportunities.

Based on Bloomberg consensus forecasts, Katrina is trading at CY16F P/E of 13.8x and P/BV of 4.5x. Katrina’s CY16F dividend yield is 3.1%.
Based on Bloomberg consensus, Jumbo Group which also operates restaurants in Singapore and China is trading at CY16F P/E of 21.7x and P/BV of 7.2x. Jumbo’s CY16F dividend yield is 2.4%.
Bloomberg consensus estimates put Katrina’s CY16F ROE at 23.5% and Jumbo’s at 28.3%.

NOT RATED
Target Price: N/A

William TNG CFA CIMB Research | http://research.itradecimb.com/ 2016-10-13

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