BreadTalk Group - RHB Invest 2016-11-17: Into The Great Kingdom

BreadTalk Group - RHB Invest 2016-11-17: Into The Great Kingdom BREADTALK GROUP LIMITED 5DA.SI

BreadTalk Group - Into The Great Kingdom

  • This morning, BreadTalk announced that it has entered into a franchise agreement to operate Din Tai Fung restaurants in the UK through a joint-venture (JV) company.
  • The JV comprises the group as the major shareholder, Din Tai Fung Taiwan, Fairy Rise Development Ltd, a UK partner and a Taiwanese partner.
  • BreadTalk expects to open the first Din Tai Fung in London in 2017.

Our View 

Favourable addition. 

  • Currently, the group operates 21 Din Tai Fung restaurants in Singapore and three restaurants in Thailand. Earlier, in our 8 Jul report BreadTalk Group : The Dough Will Rise Again, we have highlighted that BreadTalk was seeking to expand both locally and overseas. 
  • We believe the foray into a new market is favourable for the group, since the domestic market is relatively mature.

Best Din Tai Fung operator. 

  • Having eaten at Din Tai Fung restaurants in other countries, we believe the BreadTalk-operated variants are amongst the best. According to management, its new restaurant in Thailand managed to break even in less than two months. 
  • Din Tai Fung is also the most significant contributor to BreadTalk’s bottomline at the moment. Henceforth, we are confident in the group’s ability to venture into the UK market.

Reiterate BUY and SGD1.45 TP. 

  • At the moment, we think the expansion pace of Din Tai Fung restaurants in the UK would be prudent, since it is a new market to BreadTalk as well.
  • Thus, we keep our forecast unchanged and maintain our BUY rating and SGD1.45 TP (33% upside), which is pegged to 6x FY16F EV/EBITDA.

Juliana Cai CFA RHB Invest | http://www.rhbinvest.com.sg/ 2016-11-17
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.450 Same 1.450