According to Oxford Economics’ Food Industry Asia report, Singapore’s Food and Beverage (F&B) industry contributes an estimated S$14.4 billion or about 0.8% of the country’s GDP in 2014 and employs nearly 300,000 people.
Some drivers of Singapore’s F&B industry include growing population and geographical distribution, increase in consumer affluence and willingness to spend on food, and increase in popularity and convenience of online food ordering and delivery services. Click here to read more about drivers for the Singapore’s F&B industry.
SGX’s 10 Largest Restaurant Stocks Returned +18.3% in Past Year
Of the 13 Restaurant stocks listed on SGX, the 10 largest have a combined market capitalisation of close to S$2.0 billion and most companies have businesses outside Singapore or overseas expansion plans. Of the 10, Kimly and No Signboard have a pure local presence. These 10 stocks have an average total returns of +18.3% in the past one year and have an ROE and P/E ratio of 21.6% and 25.3x respectively.
Koufu Group – one of Singapore’s most established and largest operators and managers of food courts and coffee shops in Singapore – made its trading debut on SGX’s Mainboard yesterday. It has grown from operating two food courts and one coffee shop locally into an organisation comprising 47 food courts and 14 coffee shops in Singapore, with a presence in Macau. Click here for more.
| Average |
|
|
|
18.3 |
21.6 |
25.3 |
2.5 |
62.2 |
Source: Bloomberg & SGX StockFacts (data as of 18 July 2018).
Dividend payout ratio as computed by Bloomberg; definition is (total common dividends*100/income before extraordinary items less minority and preferred dividend).
*Note: ABR Hldgs 1-year total return unavailable due to low/no transaction volume; Koufu Group, No Signboard, and RE&S Holdings listed within the past one year.
Beyond the Local F&B Industry – Going International
Aside from investing in the local F&B industry, SGX-listed Restaurant stocks may also provide investors with exposure to international F&B markets through the companies’ overseas expansion plans. Some notable overseas expansion plans include:
§ BreadTalk Group recently announced partnerships to deepen their presence in China. This includes partnering Song Fa holdings to operate and manage Song Fa brand of restaurants in Shenzhen and Guangzhou, and a joint venture agreement to operate BreadTalk brand of bakeries in Chongqing. The Group also confirmed a joint venture shareholding to operate the Ding Tai Fund brand of restaurants in the UK.
§ Jumbo Group most recently announced a franchise agreement to establish and operate Ng Ah Sio Bak Kut Teh outlets in Taiwan. The franchise agreement has an initial term of 10 years and may be renewed for another 10 years subject to certain conditions, with a commitment to open at least 20 outlets in Taiwan.
§ Japan Foods earlier this year entered into joint venture agreement to launch the Menya Mushashi restaurant brand in Indonesia. This marks the return of Japan Foods into Indonesia, after its Ajisen Ramen brand franchise agreement ended in early 2015.
Most of the recently listed Restaurant stocks since 2017 have also indicated international expansion plans, some examples (from their IPO prospectus/offer documents) are:
§ Koufu Group: Most outlets are in Singapore but have a presence with one food court in Macau. The Group plans to use Singapore and Macau as springboards for expansion into overseas markets such as China, Malaysia, Indonesia and Australia.
§ RE&S Holdings: Most of its outlets are in Singapore and Malaysia, but have indicated plans to expand overseas through acquisitions, joint ventures and strategic alliances.
§ No Signboard: All of its outlets are in Singapore but have indicated plans to expand restaurant business overseas through a franchising model, particularly in China and other Asian countries.
Restaurant Stocks that Pay Dividends
According to Bloomberg data, the 10 largest Restaurants stocks have an average dividend payout ratio of 62.2% and average dividend yield of 2.5%. Recently listed Restaurant stocks from 2017 have also indicated on their IPO prospectus or offer documents intentions to distribute dividends to shareholders:
§ Koufu Group: Not less than 50% of net profits attributable to shareholders in FY18 and FY19.
§ Kimly Limited: Not less than 50% of net profits attributable to shareholders.
§ RE&S Holdings: Not less than 35% of net profits attributable to shareholders in FY18 and FY19.
No Signboard: Not less than 30% of net profits attributable to shareholders in FY18 and FY19. |
