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Singapore Kitchen Equipment: What’s Really Cooking
What’s the future of cooking like exactly? Are you expecting a process of cooking one order at a time or could this seemingly “ordinary” process be subject to change like how smartphones changed the way everything works? You’ll be surprised.
Recently,Shares Investment met up with the management team of Singapore Kitchen Equipment (SKE). Not too long ago, SKE launched its initial public offering (IPO) and listed on the Catalist board of the Singapore Exchange. Priced at $0.20 each, the offer was 5.6 times subscribed. (It opened at $0.191 and closed at $0.173 on the first day of trading.)
SKE operates in a very niche market. In a nutshell, it provides integrated kitchen equipment solutions to its clients. Its fully owned brand Q’son, is a well-known trade name in the kitchen equipment industry. SKE has worked with notable restaurant names such as Jumbo, Ah Yat, Pu Tien, and renowned hotels such as Hilton, The Fullerton and The Ritz-Carlton.
We give you the key takeaways from this talk.
Cook Chill System, Productivity Driven Cooking
One of the things that the management highlighted to be a game changer in bettering what they are already providing, and this industry’s playing field, is none other than the Cook Chill System suite.
Other than the fact that the cook chill system is introduced to widen SKE’s product mix, the uniqueness of the cook chill system does bode well with the “productivity addiction”, very much advocated by Singapore’s fast paced society.
The brilliance of the Cook Chill System, is none other than the ability to cook food in advanced, freeze it, maintaining its nutrients encompassed within, and yet preserving the texture, quality, presentation and flavour of the food. All the cooking can be done at a central location several days before the food is consumed, stored in a special freezer that locks all the qualities of the food, and then re-heated up before it’s consumed. It saves time, labour costs, and drives effectiveness.
We see this very much favoured by industries that require fast, quality, and nutritious food. These industries include caterers, restaurants, cafes, and even hospitals.
Moving Forward When Others Are Slow
Although this concept was not very acceptable by Chinese kitchens and restaurants at first, management revealed that they are seeing a slow shift towards warming up to this idea as SKE do a lot of demonstrations and live presentations on this in hotels and restaurants’ kitchens. Management said that despite this uphill climb, they see potential in this. As a matter of fact, several units of such systems have already been sold just after the IPO.
When asked about what other players in the industry is doing with the Cook Chill System, it was revealed that most of SKE’s competitors are not fervently pushing this system, and SKE is fully aware of that, and has taken concerted efforts to take advantage of this. This “first awareness branding movement” is a competitive advantage because it puts SKE in a very favourable position once Cook Chill System reaches the growth stage, which would then allow SKE to ride this wave smoothly.
Changes In Revenue Mix
The current revenue mix of SKE consists of Fabrication and Distribution (64.9 percent), and Maintenance and Services (35.1 percent). For its Maintenance and Services segment, SKE currently holds the biggest market share in Singapore. This is very much fuelled by its dedicated fleet of service engineers who are very well technically trained, and superbly efficient.
It was noted that revenue growth from the Maintenance and Services segment is expected to increase, and management expects the growth to change the revenue mix of its current standing of 35.1 percent, to 45.1 percent. This is because of the fact that Maintenance and Services revenue billing (which also commands a higher gross profit margin) is of a recurring nature as compared to that of Fabrication and Distribution, which, although can come up to hundreds of thousands in billings, is less frequently recognised and takes a longer time frame to deliver.
Expected Growth Rate And Myanmar Consideration
In relation to an expected growth figure management is looking at, SKE quipped that it is hoping to achieve a growth rate of 20 percent. As a matter of fact, management’s 1H13 targets have already been met, and SKE has expressed positivity in meeting growth expectations for FY13.
On Myanmar, SKE’s management views Myanmar to still be in a stage of infancy, and have taken a different approach compared to what they initially did when they were planning their foray to Vietnam. SKE is currently evaluating and working with a local investor, who is a hotelier, in Myanmar.
SKE is currently taking a cautiously optimistic stance on this matter and it will not have any offices in Myanmar yet. Once the food and beverage outlet is set out, SKE will further evaluate and perhaps then assign a small team of service technicians in Myanmar. As of current, SKE also has foreign wholly owned subsidiaries in Malaysia and Vietnam.
As we look forward to the year end, we will also be closely watching if SKE’s financial KPIs hit, and possibly exceed management’s expectations. Based on how everything is panning out for SKE after the IPO fundamentally, it will be interesting to see what this broth looks like over time.
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