Chaswood Resources

Kim Eng on 9 Apr 2012

Background: Chaswood Resources is one of the leading multi-concept casual dining operators in Malaysia. It has 13 brands under its belt, of which four are franchised and the rest are proprietary brands. The group listed on the Catalyst Board of the Singapore Exchange last month at S$0.30 per share via a reverse takeover of Asia Silk Holdings.

Recent development: Chaswood has received the exclusive rights to establish Bulgogi Brothers, a wellknown South Korean BBQ restaurant, in Southeast Asia. It has also signed a non-binding MOU with Singapore’s Paradise Dynasty to develop and operate restaurants in Thailand this year. Chaswood has held the franchise rights to American casual dining chain TGI Friday since 1994 and Japan’s casual dining chain, Watami brand, since 2010.


Expanding its presence. Chaswood owns 40 stores, of which 36 are in Malaysia and four in Singapore. It plans to expand to 50 outlets by yearend. Assuming the group uses RM1.9m to start a store, it would be spending RM19.4m for FY12 and around RM30m pa to meet its goal of opening 100 outlets by 2015. With historically strong operating cash flow and fresh IPO proceeds, the group should have the means to fund its expansion.

Beware of risks involved. Chaswood is highly dependent on its TGI Friday franchise, which accounted for approximately 58%, 60.7% and 65.3% of its revenue for FY08-10. Another possible risk would be an increase in rental or failure to renew leases.

Possible game changer. Chaswood intends to adopt a franchise model for its coffee café brand, Teh Tarik Place, and open up to 100 outlets in Malaysia by 2015. If this eventuates, the group could experience a large jump in sales and bottomline growth, a la BreadTalk. Currently, it owns six cafés in Kuala Lumpur and other parts of Selangor.

Rich valuations. Compared with other restaurant operators in Singapore, Chaswood’s valuations appear slightly rich, with a historical PER of 18.6x and P/BV of 3.8x. For now, it may be wise to wait for its growth to materialise before taking any action.