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SINGAPORE (May 14): DBS Group Research is maintaining Breadtalk Group at “hold” with 92 cents target as outlook for the group continues to be mixed.Breadtalk’s 4orth division posted startup losses while new restaurants remain a drag on operating profit. Revenue from its bakery in China has also yet improve.Looking ahead, higher startup costs are expected for its second Din Tai Fung in London.“There are more Song Fa Bak Kut Teh outlets planned for Shanghai, Beijing, Shenzhen, Guangzhou and Thailand which will add to startup costs,” says Alfie Yeo in a recent report.In 1Q19, BreadTalk reported earnings of $1.3 million, up 11.5% from a year ago and in line DBS forecast.Revenue grew 6.1% y-o-y to $158 million while operating profit came in at $9 million.Bakery had posted revenue growth of 2% to $72 million.But Yeo says growth came from the consolidation of Thailand’s bakeries after Breadtalk acquired the remaining 50% stake in BTM (Thailand) from Minor Food Group which resulted in consolidation of BTM’s revenues into Breadtalk’s topline.Excluding the consolidation, revenue would have fallen 5.7%, dragged down by China stores including franchised stores.Sale from 4orth division doubled to $5.5 million but operating losses widened to $2 million.So Ramen contributed positively to net profit but this was offset by startup costs of new outlets.Foodcourt sales rose 3% to $38.6 million.Restaurant sales grew 10% to $40.5 million due to full quarter contribution from Din Tai Fung London and CentralPlaza Pinklao in Bangkok but operating profit declined 43% to $4.3 million due to startup costs.“Maintain ‘hold’ at this juncture and we look to revisit our recommendation when the drag on operating profit lessens,” says Yeo.As at 3.38pm, shares in Breadtalk are trading at 80 cents.
Singapore (May 7): BreadTalk Group has announce earnings of $1.7 million for 1Q19, up 52.4% from $1.1 million in earnings a year ago on higher revenue.Revenue for the quarter rose 6.1% to $157.6 million from $148.5 million a year ago, led by growth across all business divisions. The group attributes this to its continual focus on improving the quality of its products as well as the overall efficiencies in the central kitchen and procurement efforts.Bakery division revenue rose 2.3% on-year to $72 million with the consolidation of revenue from the Thailand Bakery business following the acquisition of a 50% interest in BTM (Thailand) from Minor Food Group – excluding which the division’s revenue would have fallen 5.7% y-o-y.Meanwhile, revenue from the Food Atrium division rose 3.1% y-o-y to $38.6 million due to the opening of a new direct operated restaurant (DOR) in Shanghai under the ‘Sergeant Kitchen’ brand. In China, the group says same store sales growth (SSG) remained generally strong across the portfolio with low stall vacancy.Restaurant division revenue rose 9.8% on-year to $40.5 million with a full quarter’s contribution from the group’s first Din Tai Fung outlet in London as well as the CentralPlaza Pinklao outlet in Bangkok, which both opened in Dec 2018.SSG for the Singapore operations came in at a high-single-digit percentage which BreadTalk deems to signify the underlying strength of the Din Tai Fung brand among consumers4orth Division delivered a revenue of $5.5 million, near-doubling from $2.7 milliona year ago with the commencement of the Song Fa Bak Kut Teh operations in Beijing and Bangkok, although this has also contributed to start-up costs leading to an EBITDA loss. On a standalone basis, the group says Sō Ramen has been contributing positive net profit to the division.Overall interest expense grew 136.2% on-year to $5.9 million due to the adoption of SFRS (I) 16 accounting standard, which also led to a 338.2% higher depreciation and amortisation expense of $38.1 million for the quarter.1Q also saw the disposal and de-recognition of the group’s entire interest in loss-making business Carl Karcher Enterprises (Cayman), otherwise known as the Carl’s Jr business in China, bringing down its losses from share of results of associates to $0.05 million compared to $0.3 million a year ago.As at end-March, cash and cash equivalents stood at $151.2 million as opposed to $210.6 million in the same period last year.Looking ahead, BreadTalk says it anticipates organic growth momentum from penetration in both new and existing markets like Mainland China, Hong Kong, Taiwan and Cambodia.Plans are also underway to deliver the second Din Tai Fung restaurant in London as the group remains focused on new outlets pipeline in Singapore and Thailand. It also continues to expand with the opening of more Song Fa Ba Kut the outlets at the 4orth division.As for its Bakery business, the group notes positive outcomes from its efforts to turn it around.Shares in BreadTalk closed 1.76% lower at 84 cents on Monday.
The higher contributions from the Food Atrium division was mainly due to the addition of a new revenue stream as it adapted its business model into smaller-store formats in shopping malls through additional directed operated restaurants (DOR).