BreadTalk Group Limited: A Stable Staple
INITIATING COVERAGE
28 May 2009
RECOM PRICE/TARGET PRICE MKT CAPITALISATION BOARD SECTOR
Buy S$0.425/ S$0.57 S$99.8 Catalist Consumer -F&B
BreadTalk Group Limited
A stable staple
BREAD SP
Michelle Tan, (65) 6210-8671 – michelle.tan@cimb.com
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
28 May 2009
RECOM PRICE/TARGET PRICE MKT CAPITALISATION BOARD SECTOR
Buy S$0.425/ S$0.57 S$99.8 Catalist Consumer -F&B
BreadTalk Group Limited
A stable staple
BREAD SP
Michelle Tan, (65) 6210-8671 – michelle.tan@cimb.com
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