Together, Koufu Group, Jumbo Group & Kimly have been Singapore’s most traded Restaurant & Catering stocks in the 2020 year to 12 August, contributing 90% of the turnover of the entire Sector. The trio maintain similar market capitalisations with average capitalisation of S$288 million.
The trio have performed comparatively defensively in the 2020 year to 12 August, averaging a 6% decline, more in-line with the global industry leaders by market value, which declined 10%, than the entire global restaurant & catering industry as a whole, which declined 21%.
The trio have maintained a highly defensive performance since the STI formed its recent high of 2839 on 9 June. While all three stocks have gained over the most recent eight weeks, Jumbo Group, with 18% of its revenue reported to China, led the trio with a 31.5% gain.
Of the trio, just Koufu was expected to report this season. Koufu Exec Chair & CEO Pang Lim noted with the results on 11 August, the Group had built up a defensive and resilient business model that had been tried-and-tested, enabling it to remain cash generative and robust through economic cycles.
Measured Moves of the Global Restaurant Sector
Clearly many globally-listed restaurants have not been spared the adverse impact of economic lockdowns designed to contain the spread of COVID-19. And like most industries, the listed companies with bigger balance sheets, scale, and hence agility to adapt, have performed better over the period. For instance, the two largest relevant stocks, McDonalds Corp and Starbucks Corp have averaged a marginal gain of 0.6% in the 2020 year to 12 August, while Domino’s Pizza Inc, obviously less weighed by lockdowns, has gained 37%. And like most industries, the listed companies with bigger balance sheets, scale, and hence agility to adapt, have performed better over the period. For instance, the two largest relevant stocks, McDonalds Corp and Starbucks Corp have averaged a marginal gain of 0.6% in the 2020 year to 12 August, while Domino’s Pizza Inc, obviously less weighed by lockdowns, has gained 37%.
All-up however, the top quartile of global restaurant and catering stocks by market value, have declined 9.6% in the 2020 year to 12 August, while the entire group of these stocks have seen median declines of 21.1%. Similar performances were observed for the Asia-Pacific contingent. Note that the median market value of the top quartile of both global and Asia Pacific restaurant and catering stocks is approximately S$1 billion.
Singapore’s three most traded stocks within the sector are Koufu Group, Jumbo Group and Kimly. The trio of stocks have made up as much as 90% of the combined trading turnover of all Singapore’s Restaurant and Catering Stocks in the 2020 year to 12 August.
Together Koufu Group, Jumbo Group and Kimly have seen declines in the 2020 year to 12 August in-line with the upper quartile, billionaire stocks or industry leaders of the global Restaurant and Catering Sector. Longer the term three year annualised average declines at 7.9% (with the returns of Koufu Group taken from its IPO to present) were more aligned with the broader sector.
Koufu Group, Jumbo Group and Kimly have continued to Gain Since STI 2839 High on 9 June
As detailed in the table below, the three stocks have maintained a defensive performance since the STI formed its recent high of 2839 on 9 June. While all three stocks have gained over the most recent eight weeks, Jumbo Group led the trio with a 31.5% gain, bringing its 2020 year to 12 August decline to 4.8%, despite being down as much as 48.3% on 23 March. One aspect of Jumbo Group’s business that differs from Koufu and Kimly is that close to one-fifth of its revenue is reported to China.
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The next most traded stock of the restaurant and catering segment in Singapore is Neo Group, with S$22,799 in average daily turnover this year. With a 13.1% total return in the 2020 year to 12 August, Catalist-listed Neo Group has been amongst the 40 best performing global restaurant and catering stocks. On 23 July, Neo Group announced a 21.2% increase in net profit to S$6.3 million for its FY20 (ended 31 March), from S$5.2 million in FY19. The strong bottom-line growth was backed by a 2.7% increase in revenue to S$185.9 million, boosted by substantial revenue growth from the Group’s core Food Catering business. Neo Group Founder, Chairman and CEO Neo Kah Kiat noted that the Group’s strategy of nurturing diversity through the build-up of its highly synergistic business segments over the last few years, and by having a multi-brand platform, has continued to deliver resilient performances. Mr Neo also added that the Group was encouraged to see good growth momentum, notwithstanding the challenging macro environment brought on by the global pandemic.
Highly Competitive P/B Valuations
The trio of Koufu Group, Jumbo Group and Kimly average a Price-to-Book (P/B) ratio that is precisely between the 3.4x median P/B ratio of the top quartile of global restaurant and catering stocks by market value, and the 3.2x median P/B ratio of the top quartile of Asia Pacific restaurant and catering stocks by market value. As noted above, both of the top quartile of global and Asia Pacific restaurant and catering stocks have median market capitalisations of S$1 billion. Looking beyond just the top quartiles of the sector by market value, the median P/B of global restaurant and catering stocks is 2.0x.
Restaurant Resilience & Balance Sheets
Of Singapore’s three most traded restaurant and catering stocks, just the one stock – Koufu Group was expected to report this earnings season, which it did on 11 August. While Koufu Group and Jumbo Group reported declines in profit as of their last financial reporting, all three stocks still maintained a profit.
For the most recent results and outlooks:
On 11 August, Koufu reported 1HFY20 (ending 30 June) revenue of S$89 million, and net profit after tax of S$2.5 million. Koufu noted that since 2 June 2020, activities were allowed to gradually resume over three phases of reopening. Similarly, the Group has resumed operations for most outlets since 19 June 2020 in Phase 2 of the reopening, which has seen its food courts and coffee shops located in the heartlands, tea beverage kiosks and full-service restaurants making significant improvements. Koufu noted its balance sheet remained robust with cash and cash equivalents of S$76.4 million and net cash of S$72.0 million as at 30 June 2020, indicating a deep war chest to offer financial flexibility to the Group. For more click here.
Back on 14 May, Jumbo Group reported 1HFY20 (ending 31 March) revenue of S$67 million, and profit attributable to the owners of the company of S$2.1 million. The Group then noted it would continue to remain nimble in navigating the uncertainties and manage the financials and operations of the Group in the best interests of its stakeholders and nonetheless, the Group continued to maintain a healthy balance sheet, with minimal borrowings and an adequate level of liquidity. For more click here.
Back on 11 May, Kimly reported 1HFY20 (ending 31 March) revenue of S$107.4 million and profit attributable to the owners of the company of S$10.5 million. Back then, the Group noted it was mindful of the challenges posed by COVID-19 pandemic, with the negative impact mitigated to an extent by grants from the government and rental waivers and property rebates from landlords. The Board also noted that besides placing focus on enhancing its food offerings and operations efficiency in the upcoming year, the company remained committed to secure more long-term direct ownership of food outlets and food stalls in matured estates which is was in line with its asset ownership strategy. For more click here.