China has a Flu and the Whole World Gets Sick

Taxi drivers are complaining about low pick up rate and are suffering from massive income cut. SMRT and Comfort Delgro will suffer.

Tourists are not coming to Singapore. So the likes of Gentings and Straco are suffering from zilch revenue.

Tourists are staying away from flying into Singapore given the number of cases. Singaporeans are also worried about flying out. So SIA will suffer, and the effect will cascade to SATS.  SIA has already cut large number of flights in the months ahead and staff are surplus a plenty.

No tourists, no major events, the MICE sector also suffers. So Kingsmen will suffer.

Trade grinding to a halt because China factories are only slowly trying to resume amidst their lockdowns and containment. So all the industrial and shipping side are facing slowdowns. I think Yangzijiang and industrial REITs will suffer.

Malls are pretty empty these days. All staying home to avoid crowded places.  So REITs like Suntec REIT will suffer.

Who gains in times like this? Maybe the likes of TopGlove and Riverstone, and hospitals (Raffles Medical, First REIT). Maybe the supermarket chains too, if they have a strong Internet ordering front with home delivery service.

Banks are going to suffer from increasing bad loans and slow down in loans for business.  OCBC, UOB, DBS will suffer.

Will the Telcos (Singtel, Starhub) do better as there could be more Internet traffic? But the margins are poor, and if the traffic are largely generated while at home with their existing broadbands, the effect is likely neutral.

Capitaland and even Temasek Holdings are tightening their belts and freezing pay. They are trying their best not to retrench the workforce.

Meantime, Breadtalk is being taken private. Alas.

All in, a bleak picture of downtrend in the months ahead. Another Black Swan event as nature rears its head. Definitely BUY opportunities if they survive this. Only a question of when?

I pity the graduating students from all walks joining the workforce this year.

Breadtalk revisited - A RamenPlay?

There was an occasion when I needed to go to Velocity at Novena. I flagged down a cab and promptly fell asleep. Some time later, I woke up and found myself at Vivocity. Not quite where I wanted to be. Need to be careful with places like this. Kind of recalled another time when I was took a cab to Causeway Point at Woodlands. I was nearly sent across the Causeway! Yesterday, I had an errand to run and went to Velocity once again. This time, I took the train instead.

Having just returned from a trip to Japan recently, I had this continued craving for Japanese food. So it was great to discover a RamenPlay outlet there. I decided to give it a go.

I had previously reviewed Breadtalk - A Case of Over-expanded Yeast? and mentioned that I wasn't too impressed with its RamenPlay chain. Boy was I wrong. It was lunch time and the store was crowded. The food wasn't bad either. Yummy. Location was good and clearly attracted the working class from the neighborhood. I wonder if all its stores are doing as well?

I had originally bought some shares in BreadTalk in 2012 at $0.57. And again when it went down to $0.53. Shortly after, in 2013, it went up to $0.805. I decided to sell off the equivalent amount that I had invested and held onto the balance. Amazingly, it continued to trend upwards, and more recently, reached $1.45. Given that its PE ratio had reached 29x, I decided it was time to exercise caution and trimmed my holding. It's now at $1.32.

Stock Data
Market Capitalization (SGD 'mil)	372.10
Common Shares Outstanding ('mil)	281.3286
52 Week High (SGD) (07/05/2014)	1.490
52 Week Low (SGD) (03/09/2013)	0.835
52 Week Return (%)	53.490
Average Volume ('mil)	0.2840
Beta	1.31

Financial strength
Current Ratio	0.70
Quick Ratio	0.65
Long Term Debt to Equity (%)	147.11
Total Debt to Equity (%)	179.57
Interest Coverage Ratio (TTM)	22.77
Free Cash Flow to Firm (TTM) (SGD 'mln)	-33.08

Margin
Gross Margin (TTM) (%)	52.56
Operating Profit Margin (TTM) (%)	4.03
Net Profit Margin (TTM) (%)	2.88

Dividend §
Annual Dividend per share (SGD)	0.0180
Dividend Yield (TTM) (%)	1.36
Dividend Yield (Annual) (%)	1.36
Payout Ratio (TTM) (%)	37.05
3-Year Growth Rate (%)	21.64

Valuation
Historical P/E Ratio	27.39
P/E Ratio (TTM)	27.01
P/BV (latest interim)	3.90
BVPS (latest interim) (SGD)	0.3388
EPS TTM (SGD)	0.0489

ROA (%)	7.29	5.94	5.04	4.38	3.91
ROE (%)	19.60	17.44	15.82	14.95	15.41
DPS (SGD)	0.0083	0.0100	0.0100	0.0080	0.0180
EPS (SGD)	0.0394	0.0399	0.0411	0.0425	0.0482

[Source: POEMS, dated 28 Jun 2014]

Breadtalk remains an interesting prospect for me. Although its PE ratio had improved to 27x, it's still too high for my liking. It appears highly leveraged at ~180% of debt. Can it go all the way down to $0.73? I'll maintain watch on this stock. I like Breadtalk. Munch munch.

Disclaimer: This is not a call to buy or sell. Do make your own assessment and decide for yourself. I am not a financial advisor. I have sold down but continue to hold some shares in Breadtalk. 

Breadtalk - a case of over-expanded yeast?

Breadtalk doesn't really need much of an introduction.  BreadTalk, Toastbox, Din Tai Fung are places I patronise and these businesses are buzzing. The rest like RamenPlay, The Icing Room and such don't excite me as much. Food Republic is reasonably well patronised, dependent on locations, but operates in a very commoditised space.


The figures below show just how much it has moved over the past year alone.  It was hence time to re-examine the company

Stock Data
Market Capitalization (SGD 'mil)	396.06
Common Shares Outstanding ('mil)	281.5116
52 Week High (SGD) (07/05/2014)	1.490
52 Week Low (SGD) (11/06/2013)	0.820
52 Week Return (%)	44.850
Average Volume ('mil)	0.8867
Beta	1.32

Financial strength
Current Ratio	0.70
Quick Ratio	0.65
Long Term Debt to Equity (%)	147.11
Total Debt to Equity (%)	179.57
Interest Coverage Ratio (TTM)	45.72
Free Cash Flow to Firm (TTM) (SGD 'mln)	-36.63

Margin
Gross Margin (TTM) (%)	53.04
Operating Profit Margin (TTM) (%)	4.17
Net Profit Margin (TTM) (%)	3.01

Dividend §
Annual Dividend per share (SGD)	0.0180
Dividend Yield (TTM) (%)	1.28
Dividend Yield (Annual) (%)	1.28
Payout Ratio (TTM) (%)	37.56
3-Year Growth Rate (%)	21.64

Valuation
Historical P/E Ratio	29.16
P/E Ratio (TTM)	29.15
P/BV (latest interim)	4.21
BVPS (latest interim) (SGD)	0.3337
EPS TTM (SGD)	0.0482

[Source: POEMS]

Its debt level is horrendous at almost 180%.  The company is heavily leveraged as it seeks to expand.

Its gross margin is high at 53.01% and is reflective of its branding.  However, its net profit margin is very low at 3.01%.  Its businesses require significant material and manpower.  The later is an especially difficult problem in manpower scarce Singapore.  Given the low margin, scale probably matters to reap maximum economy of scale, and hence its drive to expand rapidly.

My sense is that it is likely over-priced right now at a P/E ratio of 29 and P/B of 4.21.  Dividend yield isn't great right now either at 1.28%.

A company with a brand name that I can recognise, but for now possibly over-priced.  Time to exercise caution.

Related:
Breadtalk Group Gunning for Growth [Singapore Stock Market News]
Breadtalk AGM 2014 by Rusmin Ang [Next Insight]

[Disclaimer. This is not a call to buy or sell. It is only a record for myself on why I bought this company and am maintaining a cautious outlook by selling down to a minimal holding at this time.]