BreadTalk Group Limited: A Stable Staple

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  • Topic: Profit margin, Wisma Atria, BreadTalk
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28 May 2009


Buy S$0.425/ S$0.57 S$99.8 Catalist Consumer -F&B

BreadTalk Group Limited
A stable staple


Michelle Tan, (65) 6210-8671 –

BreadTalk was incorporated in Singapore on 6 Mar 03 as an investment holding company. It was listed on the SGX Catalist Board in 2003 and operates bakery outlets, food courts and restaurants. Spreading wings far and wide. BreadTalk has come a long way. To date, it has 246 bakery outlets, 31 food courts and eight restaurants, supported by more than 2,000 employees in 12 countries. Further growth expected in the PRC and Singapore. The group intends to expand further in China and Singapore, with the aim of sustaining its earnings. We expect this to support strong revenue growth over the next few years. Net profit forecast to grow at 29.3% CAGR over FY09-11. Net profit increased by 64.6% yoy in FY07, before slowing to 6.2% in FY08. The deceleration was blamed on its underperforming J.Co Donuts business. However, this is no longer part of the group after the disposal of its 70%-owned Twin Peak Venture Singapore Pte Ltd. We expect profit growth to pick up to around 31% this year from the opening of new outlets in 2009 and lower raw material costs. We forecast a net profit CAGR of 29.3% for FY09-11. Initiate with Buy and target price S$0.57. We initiate coverage of the stock with a BUY recommendation and a target price of S$0.57, based on sum-of-the-parts valuation. This translates to 34.1% upside. Financial summary

FYE Dec Revenue (S$ m) EBITDA (S$ m) EBITDA margins (%) Pretax profit (S$ m) Net profit (S$ m) EPS (S cts) EPS growth (%) P/E (x) Gross DPS (S cts) Dividend yield (%) P/NTA (x) ROE (%) Net cash per share (S$) P/CF (x) EV/EBITDA (x) Source: Company, CIMB estimates

2007 156.6 21.9 14.0 11.2 7.3 3.2 70.7 13.2 0.2 0.5 1.4 20.9 0.11 3.4 3.8

2008 212.2 26.4 12.4 12.0 7.8 3.3 2.4 12.8 1.0 2.4 1.1 16.1 0.12 3.0 3.2

2009F 244.1 36.9 15.1 13.7 10.2 4.3 31.5 9.8 1.6 3.7 1.2 18.0 0.09 3.1 2.3

2010F 275.8 45.6 16.5 17.8 13.3 5.6 29.9 7.5 1.9 4.6 0.9 20.1 0.15 2.4 1.8

2011F 303.4 55.0 18.1 22.6 16.8 7.1 26.6 5.9 2.3 5.5 0.8 21.5 0.25 2.0 1.5

Market capitalisation & share price information
Market cap 12-mth price range 3-mth avg daily volume # of shares (m) Est. free float (%) Wrts/ICULS o/s (m) Conv. price (S$) S$99.8m S$0.25/S$0.43 S$0.07m 234.9 32 None None Share price perf. (%) Relative Absolute Major shareholders Meng Tong Quek Lih Leng Lee Keywise Capital UBS AG 1M 8.1 37.1 3M (5.2) 37.1 12M 40.0 3.7 % held 33.9 18.5 11.0 10.01

Source: Company, CIMB estimates

Please read carefully the important disclosures at the end of this publication.


CIMB Research Report

BreadTalk was incorporated in Singapore on 6 Mar 03 as an investment holding company. Its principal subsidiary, BreadTalk Pte Ltd, is a private limited company incorporated in Singapore on 24 Apr 00. The group was founded by its managing director, Mr George Quek and Executive Director, Ms Katherine Lee. It was listed on the SGX Catalist Board in 2003. Principal businesses. BreadTalk started out operating retail outlets selling a wide selection of breads, buns, cakes and pastries. It has expanded into the restaurant and food court businesses. BreadTalk’s businesses now fall into four categories: 1) bakery; 2) food atrium; 3) restaurant; and 4) franchise. Some bakeries are owned while others are franchised. Only owned bakeries are grouped under the Bakery segment which contributed 44.7% of FY08 group revenue, the largest. The Food Atrium segment is made up of food courts operated by the group, contributing 32.6% of FY08 revenue. The restaurant segment is made up of the Din Tai Fung restaurant chain (six restaurants) and other outlets such as Station Kitchen and Cosmopolitan Café. Lastly, the Franchise segment comprises franchised bakery outlets. In FY08, about...
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