James Koh (left) is an analyst with Maybank Kim Eng ResearchTime & date: 9.30 am, 22 April 2014.
Venue: BreadTalk HQ, Tai Seng Street.
HAVING MET and heard from the entire board and management team, I came away even more convinced that this is a company (and stock) that is going places in the next 2-3 years.
The AGM was a long session with many different points of discussion.
Would just like to provide some important takeaways for now:
- Each of BreadTalk's business provides an important benefit to the group as a whole and makes it stronger. Bakeries = Cash Flow, Restaurants = Margins and Food Courts = Bargaining power against mall operators.
In Singapore, it is now by far the most dominant F&B player because of this and it is trying to build the same scale in its other markets.
- Remains confident of achieving 1,000 stores by 2014 and 2,000 by 2018. In the meantime, they set a very ambitious target of 8% net margin eventually. Our own forecast only expects them to hit 3% by 2016.
Higher margins will come from moderation of depreciation, continued cost rationalization, bigger scale and more leverage against malls/ suppliers.
Guests at a BreadTalk event in Shanghai sample its offerings. Photo: Company- China will be the key area of focus for growth. Competition is numerous and sometimes intense, but BreadTalk is the no.1 brand bakery in the country. There is scope to increase stores in first tier cities and to broaden its presence in 2nd/3rd tier cities.
Management expects higher margins in China when they achieve a scale of 500 outlets vs 300 currently.
- By now, the company has more than 10 years of experience in China and has got to the stage where others value their expertise there, including Minor International which is keen to work with them.
- Property investments are strategic and carefully-thought out. Katong 112 is a good example of them achieving very good store fronts due to them being partners.
They expect to take up similar kind of spaces in the rest of their investments such as Chijmes, Triple One.
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