BreadTalk Group’s 1Q15 revenue came in 8.6% higher YoY to S$152.5m with growth seen across all segments and was within our expectations as it formed 23% of our FY15 forecast. PATMI was up 10.9% YoY to S$2.0m, but only met 16% of our full-year forecast. All segments (Bakery, Food Atrium, Restaurant) saw growth in topline but PATMI results were mixed, with earnings mainly supported by growth in the Restaurant division. However, we reiterate that growth potential will be limited as it can only open DTF in Singapore and Thailand. With 1Q typically being the weakest quarter, our estimates remain unchanged for now. All considered, we are keeping our SELL rating with a fair value estimate of S$1.14 (previous S$1.02) as we roll forward our valuation to FY15/16F. Valuations still seem fairly expensive as the stock is currently trading at 28.3x FY15/16F PER.
1Q15 PATMI lower than expected
BreadTalk’s 1Q15 revenue came in 8.6% higher YoY to S$152.5m with growth seen across all segments and was within our expectations as it formed 23% of our FY15 forecast. PATMI was up 10.9% YoY to S$2.0m, but only met 16% of our full-year forecast. Expenses as a percentage of revenue stayed largely the same vs. 1Q14, while the group saw a 29.5% YoY increase in other income due to receipts under the Singapore’s Wage Credit Scheme. Without such receipts, PATMI would have been conceivably lower than expected.
Underperforming stores hit profitability
Both the Bakery division and Food Atrium division saw revenue rise by 11.3% and 7.8% YoY respectively. However, the weaker bottom-line performance for the Bakery division was attributable to lower profitability from outlets in Mainland China, underperforming stores in Malaysia and higher operating costs in Singapore. The Food Atrium business was also hit by weaker store performance in Mainland China. In addition, some of the newly opened outlets led to a higher cost structure in terms of rental and labour costs.
Earnings supported by Restaurant division
Din Tai Fung (DTF) in Singapore and Thailand continued to drive the segment’s revenue growth of 13.2% YoY while Ramen Play contributed lower revenue due to the closure of six non-performing stores last year. We understand that PATMI also ‘improved significantly’, but we reiterate that growth potential will be limited as it can only open DTF in Singapore and Thailand.
Maintain SELL
1Q is typically the weakest quarter. 10 Bakery stores were opened, but there was one outlet closure each for Food Atrium and Restaurant. We continue to see the Food Atrium business as the long-term growth driver, but the longer breakeven period for new outlets as compared to other segments is a dampening factor in the near-term for BreadTalk’s bottom-line. All considered, we are keeping our SELLrating with a fair value estimate of S$1.14 (previous S$1.02) as we roll forward our valuations to FY15/16F. Valuations still seem fairly expensive as the stock is currently trading at 28.3x FY15/16F PER.
BreadTalk’s 1Q15 revenue came in 8.6% higher YoY to S$152.5m with growth seen across all segments and was within our expectations as it formed 23% of our FY15 forecast. PATMI was up 10.9% YoY to S$2.0m, but only met 16% of our full-year forecast. Expenses as a percentage of revenue stayed largely the same vs. 1Q14, while the group saw a 29.5% YoY increase in other income due to receipts under the Singapore’s Wage Credit Scheme. Without such receipts, PATMI would have been conceivably lower than expected.
Underperforming stores hit profitability
Both the Bakery division and Food Atrium division saw revenue rise by 11.3% and 7.8% YoY respectively. However, the weaker bottom-line performance for the Bakery division was attributable to lower profitability from outlets in Mainland China, underperforming stores in Malaysia and higher operating costs in Singapore. The Food Atrium business was also hit by weaker store performance in Mainland China. In addition, some of the newly opened outlets led to a higher cost structure in terms of rental and labour costs.
Earnings supported by Restaurant division
Din Tai Fung (DTF) in Singapore and Thailand continued to drive the segment’s revenue growth of 13.2% YoY while Ramen Play contributed lower revenue due to the closure of six non-performing stores last year. We understand that PATMI also ‘improved significantly’, but we reiterate that growth potential will be limited as it can only open DTF in Singapore and Thailand.
Maintain SELL
1Q is typically the weakest quarter. 10 Bakery stores were opened, but there was one outlet closure each for Food Atrium and Restaurant. We continue to see the Food Atrium business as the long-term growth driver, but the longer breakeven period for new outlets as compared to other segments is a dampening factor in the near-term for BreadTalk’s bottom-line. All considered, we are keeping our SELLrating with a fair value estimate of S$1.14 (previous S$1.02) as we roll forward our valuations to FY15/16F. Valuations still seem fairly expensive as the stock is currently trading at 28.3x FY15/16F PER.
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