Yeo Hiap Seng Ltd - CGS-CIMB Research 2018-09-21: Paving The Road To Sustainable Growth


Yeo Hiap Seng Ltd - Paving The Road To Sustainable Growth

  • Yeo Hiap Seng (YHS) is a branded F&B player established in 1900. Its product range consists of a wide range of Asian drinks, bottled tea and coffee and isotonic drinks.
  • Since FY14, Yeo Hiap Seng has focused on expanding and rejuvenating its F&B business.
  • Yeo Hiap Seng trades at a historical FY17 P/BV of 0.86x with net cash of S$278m (at end-Jun 2018), accounting for 49% of its market cap as at 20 Sep 2018.

Established F&B brand name

  • Yeo Hiap Seng (YHS) was founded in 1900 and has grown from a soy sauce manufacturer to a major food and beverage (F&B) player in Asia today. Yeo Hiap Seng has its own brand of Asian drinks (chrysanthemum tea and barley) and canned food products (canned chicken curry and culinary sauces). Yeo Hiap Seng also exports to the US and Europe.
  • In 2003, Yeo Hiap Seng unveiled a new range of “Y-Generation” drinks with creative flavours, packaging and logo to target younger consumers.

~ SGinvestors.io ~ Where SG investors share

Pure F&B play now

  • Since the disposal ofhttps://SGinvestors.io~ Where SG investors share its final property unit in FY13, Yeo Hiap Seng is now fully refocused on its core consumer F&B business. The company sold its investment in Super Group Limited (Delisted) in FY17.
  • On 18 Mar 2016, Yeo Hiap Seng entered into a joint venture with China Huiyuan Juice Group Limited (1886 HK) to develop, manufacture, sell and distribute fruit and vegetable juices targeting the Malaysian market.

1H18 financial performance

  • Yeo Hiap Seng’s 1H18 revenue rosehttps://SGinvestors.io 8.8% y-o-y, while net profit increased 42.3% y-o-y. Its gross margin was flattish y-o-y at 32.5% in 1H18.
  • Yeo Hiap Seng enjoyed y-o-y higher sales in Malaysia, Singapore, Cambodia and China in 1H18. Its 1H18 earnings performance was also boosted by a S$2.9m gain from the sale of property, plant and equipment and S$3.6m in fair value gains on financial assets. No interim dividend was declared.

Outlook – management’s comments

  • For the next 12 months, Yeo Hiap Seng expects F&B profit margins to remain under pressure from the weak consumption outlook for the markets that the group operates in. The company expects its selling prices to stay competitive, while likely fluctuations in raw material prices and foreign exchange rates could have negative impact on the group’s earnings in the near future.https://SGinvestors.io
  • Yeo Hiap Seng plans to continue investing in rejuvenating its brand and launch new products, develop its agency business and improve operating efficiencies.

Historical valuations

  • Yeo Hiap Seng currently trades at a historical FY17 P/E of 3.7x, P/BV of 0.86x against 23.4% ROE.
  • In the past five years, Yeo Hiap Seng has been in a net cash position. At end-Jun 2018, Yeo Hiap Seng had net cash of S$278m or 49% of its market cap as at 20 Sep 2018.
  • Although it does not have an official dividend policy, Yeo Hiap Seng has paid dividends in the past five years.https://SGinvestors.io

William TNG CFA CGS-CIMB Research | https://research.itradecimb.com/ 2018-09-21
SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998.000

* This Eyes On the Ground report represents a preliminary assessment of the subject company, and does not represent initiation into CIMB's coverage universe. It does not carry investment ratings and CIMB does not commit to regular updates on an ongoing basis.