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S INGAPORE CIMB Research Report BreadTalk Group Limited A stable staple INITIATING COVERAGE   28 May

CIMB Research Report

BreadTalk Group Limited

A stable staple

INITIATING COVERAGE

 

28 May 2009

RECOM

Buy

PRICE/TARGET PRICE

S$0.425/ S$0.57

MKT CAPITALISATION

S$99.8

BOARD

Catalist

SECTOR

Consumer -F&B

BREAD SP

Michelle Tan, (65) 6210-8671 – michelle.tan@cimb.com

BreadTalk was incorporated in Singapore on 6 Mar 03 as an investment holding company. It was listed on the SGX Catalist Board in 2003 and operates bakery outlets, food courts and restaurants.

Spreading wings far and wide. BreadTalk has come a long way. To date, it has 246 bakery outlets, 31 food courts and eight restaurants, supported by more than 2,000 employees in 12 countries. Further growth expected in the PRC and Singapore. The group intends to expand further in China and Singapore, with the aim of sustaining its earnings. We expect this to support strong revenue growth over the next few years. Net profit forecast to grow at 29.3% CAGR over FY09-11. Net profit increased by 64.6% yoy in FY07, before slowing to 6.2% in FY08. The deceleration was blamed on its underperforming J.Co Donuts business. However, this is no longer part of the group after the disposal of its 70%-owned Twin Peak Venture Singapore Pte Ltd. We expect profit growth to pick up to around 31% this year from the opening of new outlets in 2009 and lower raw material costs. We forecast a net profit CAGR of 29.3% for FY09-11. Initiate with Buy and target price S$0.57. We initiate coverage of the stock with a BUY recommendation and a target price of S$0.57, based on sum-of-the-parts valuation. This translates to 34.1% upside.

Financial summary

FYE Dec

2007

2008

2009F

2010F

2011F

Revenue (S$ m)

156.6

212.2

244.1

275.8

303.4

EBITDA (S$ m)

21.9

26.4

36.9

45.6

55.0

EBITDA margins (%)

14.0

12.4

15.1

16.5

18.1

Pretax profit (S$ m)

11.2

12.0

13.7

17.8

22.6

Net profit (S$ m)

7.3

7.8

10.2

13.3

16.8

EPS (S cts)

3.2

3.3

4.3

5.6

7.1

EPS growth (%)

70.7

2.4

31.5

29.9

26.6

P/E (x)

13.2

12.8

9.8

7.5

5.9

Gross DPS (S cts)

0.2

1.0

1.6

1.9

2.3

Dividend yield (%)

0.5

2.4

3.7

4.6

5.5

P/NTA (x)

1.4

1.1

1.2

0.9

0.8

ROE (%)

20.9

16.1

18.0

20.1

21.5

Net cash per share (S$)

0.11

0.12

0.09

0.15

0.25

P/CF (x)

3.4

3.0

3.1

2.4

2.0

EV/EBITDA (x)

3.8

3.2

2.3

1.8

1.5

Source: Company, CIMB estimates

Market capitalisation & share price information

Market cap 12-mth price range 3-mth avg daily volume # of shares (m) Est. free float (%) Wrts/ICULS o/s (m) Conv. price (S$)

S$99.8m

Share price perf. (%) Relative Absolute Major shareholders Meng Tong Quek Lih Leng Lee Keywise Capital UBS AG

1M

3M

12M

S$0.25/S$0.43

8.1

(5.2)

40.0

S$0.07m

37.1

37.1

3.7

234.9

 

% held

32

33.9

None

18.5

None

11.0

 

10.01

Source: Company, CIMB estimates

Please read carefully the important disclosures at the end of this publication.

Background

BreadTalk was incorporated in Singapore on 6 Mar 03 as an investment holding company. Its principal subsidiary, BreadTalk Pte Ltd, is a private limited company incorporated in Singapore on 24 Apr 00. The group was founded by its managing director, Mr George Quek and Executive Director, Ms Katherine Lee. It was listed on the SGX Catalist Board in 2003. Principal businesses. BreadTalk started out operating retail outlets selling a wide selection of breads, buns, cakes and pastries. It has expanded into the restaurant and food court businesses. BreadTalk’s businesses now fall into four categories: 1) bakery; 2) food atrium; 3) restaurant; and 4) franchise. Some bakeries are owned while others are franchised. Only owned bakeries are grouped under the Bakery segment which contributed 44.7% of FY08 group revenue, the largest. The Food Atrium segment is made up of food courts operated by the group, contributing 32.6% of FY08 revenue. The restaurant segment is made up of the Din Tai Fung restaurant chain (six restaurants) and other outlets such as Station Kitchen and Cosmopolitan Café. Lastly, the Franchise segment comprises franchised bakery outlets. In FY08, about 7.5% of the group’s income was derived from franchises. Altogether, BreadTalk has under its umbrella 246 bakery outlets, 31 food courts (atria) and eight restaurants, supported by more than 2,000 employees in 12 countries.

Figure 1: Bakeries (owned and operated)

No. of outlets Singapore PRC Hong Kong Malaysia Thailand

31-Mar-08

31-Dec-08

31-Mar-09

37

42

43

31

36

37

2

5

6

7

12

12

3

3

3

Total

80

98

101

Figure 2: Bakeries (franchised)

No. of outlets Indonesia Philippines Kuwait UAE Oman Taiwan India Korea Bahrain PRC

31-Mar-08

31-Dec-08

31-Mar-09

40

48

50

11

15

15

7

7

7

3

4

-

-

1

1

1

-

-

4

7

7

-

1

2

-

-

1

43

58

62

Total

109

141

145

Figure 3: Food courts

No. of food courts PRC Hong Kong Singapore Malaysia

31-Mar-08

31-Dec-08

31-Mar-09

20

20

22

2

5

5

3

3

3

1

1

1

Total

26

29

31

Source: Company, CIMB-GK Research

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Figure 4: Type of food outlet/restaurants run by BreadTalk

Name

Description

BreadTalk

BreadTalk is an award-winning bakery chain that has over 1,000 different types of bakery items and prides itself in revolutionising the concept of bakeries with ‘see-through’ kitchens showing the expertise of its bakers.

The Icing Room

The Icing Room is a girlish-themed shop that sells a wide range of cakes, pastries and cookies and brings with it a unique proposition of allowing customers to decorate their own cakes.

Toast Box

Toast Box was developed in 2005 to recreate the feel of local Nanyang coffee shops in the 1960s and 70s. It serves traditional favourites such as peanut butter thick toast, mee siam, kaya toast and soft boiled eggs. Coffee and other hot beverages are also prepared in the traditional “pulled” style.

Food Republic

Food Republic is the group’s food court business. It offers a wide spread of local hawker and street food under one roof and in an air-conditioned environment.

Din Tai Fung

Din Tai Fung is known for its delicious and healthy house specialities such as its ‘Xiao Long Bao’ (steamed pork dumplings). In 2008, the restaurant was recognised as one of Taiwan’s best restaurants in the 2008 Taipei Top Restaurant Guide.

Carl’s Junior

Carl’s Junior is a fast-food chain offering juicy, premium- quality charbroiled burgers in western US.

The Station Kitchen

The Station Kitchen is the group’s integrated F&B concept for diners at the 70,000 sf St James Power Station, one of Singapore’s latest clubbing hot spots. Established in Dec 06, the 250-seat restaurant offers two cuisine concepts in its 6,500 sf dining hall – Charcoal and Ah Wok.

Source: Company

Unique bread concept. BreadTalk was the first to adopt a sleek, transparent glass concept for its kitchens to enable public viewing of the baking of breads and pastries, so as to draw interest. A wide variety of recipes, bread designs and promotions, coupled with the constant rollout of new bakery items, caters to the ever-changing tastes of consumers. Depending on the size of each outlet, between 60 and 80 items are offered daily. Revenue from the sale of bakery items sold at BreadTalk retail stores formed more than 44% of FY08 revenue. Strong branding. The BreadTalk brand has evolved to become one of the most recognisable local brands in Singapore. In 2002, the group won the “Singapore Promising Brand Award 2002” awarded by ASME and SPH and was also voted Singapore’s Most Popular Brand in a joint poll by the ASME and SPH. Strategic locations. The group’s outlets can be found in accessible locations with high pedestrian traffic flow. This pulls in customers as they walk by. Many of the outlets are located near public transport systems such as bus terminals, Mass Rapid Transit stations and Light Rail Transport stations. Some stores are also located near popular departmental stores and supermarkets. IT-savvy. Its central kitchen and retail outlets in Singapore have all been installed with web-enabled cameras using Internet Protocol. There are at least three cameras at each outlet, to help management monitor the outlets from any place with Internet connectivity. If anything is amiss, management can immediately call up the relevant branch manager and rectify the problem in a short span of time. The retail outlets are also installed with point-of-sale systems. This means that daily sales figures and itemised sales volumes can be processed at the end of each day for each outlet, allowing management to evaluate the popularity of each item and understand customer trends better. Experienced management. Mr George Quek, the managing director, has been in the F&B business for more than 20 years. He is supported by a team of senior managers with more than nine years of experience on average in the F&B or retail industries.

[

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Seasonality of sales. The group generally generates higher sales during festive seasons such as Christmas and the Mid-Autumn Festival, as well as school holidays in the months of June and December. Main competitors. Direct competitors of BreadTalk outlets are local names such as Four Leaves and My Bread. For the group’s Din Tai Fung restaurants, the main competitor is Crystal Jade. Major customers. No customer accounted for more than 5% of turnover in the past few financial years as customers are mainly walk-in customers. Major ingredients. Major purchases are ingredients for baking which include flour, butter, sugar and fillings for the food items. All the ingredients are sourced in Singapore. Inventory management. Inventory management is prudent as most of the required raw materials are easily available and are delivered daily by suppliers. Inventory turnover in FY07-08 was 6-7 days. However, the group orders flour in bulk and these are stored for 3-6 weeks. Inventories are also managed on a first-in-first-out basis.

Figure 5: Revenue breakdown by business segment (FY08)

Figure 6: Revenue breakdown by geography

(FY08)

(FY08) Figure 6: Revenue breakdown by geography (FY08) Source: Company Figure 7: Some awards won over
(FY08) Figure 6: Revenue breakdown by geography (FY08) Source: Company Figure 7: Some awards won over

Source: Company

Figure 7: Some awards won over the years

Source: Company Figure 7: Some awards won over the years Source: Company, CIMB-GK Research Figure 8:
Source: Company Figure 7: Some awards won over the years Source: Company, CIMB-GK Research Figure 8:
Source: Company Figure 7: Some awards won over the years Source: Company, CIMB-GK Research Figure 8:

Source: Company, CIMB-GK Research

Figure 8: A sampling of popular BreadTalk items

over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:
over the years Source: Company, CIMB-GK Research Figure 8: A sampling of popular BreadTalk items Source:

Source: Company

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Industry outlook

F&B establishments have been growing. Singapore’s diverse culture has produced a highly developed F&B sector offering an extensive array of cuisines. Singapore has been ranked alongside Hong Kong and Australia as one of the three major eating capitals in the Asia-Pacific. F&B establishments here can be broadly categorised into restaurants, fast food outlets, food caterers and others (including cafes, coffee houses, food courts etc.) According to the Singapore Department of Statistics, there were 5,200 F&B establishments in Singapore in 2007, up 6.4% yoy. Sector operating receipts grew 8.7% yoy to S$5.0bn in 2007.

Figure 9: F&B establishments are on the rise

 

2007

2006

Change (%)

F&B establishments

5,244

4,927

6.40%

Source: Economic Survey Series - Food & Beverage Services 2007, CIMB-GK Research

Stiff competition. The F&B industry in Singapore is highly competitive and fragmented with low barriers to entry. With many bakeries reinventing their existing products and expanding, it gets increasingly difficult to compete for choice locations and market share.

Impact of swine flu minimal. As the global swine-flu pandemic is not transmissible via the consumption of cooked pork, the impact on the F&B industry should be minimal.

Subject to inflationary pressures. As with most other industries in Singapore, the F&B industry has been hit by the inflation of rental expenses and utility charges, which has hurt profitability. As such, many establishments have been raising their ASPs. We believe prices will continue to trend up and businesses will have to continually adjust their selling prices in order to maintain profit margins.

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5

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Figure 10: Historical revenue and net profits of some Singapore-listed F&B (retail) players

BreadTalk

 
  Revenue Net profit

Revenue

  Revenue Net profit

Net profit

250

10

200

0

0

8

150

6

100

4

50

2

0

FY06

FY07

FY08

Food Junction

 

46

Revenue

46 Revenue Net profit 7

Net profit

7

45

44

45 44 6 5
45 44 6 5

6

5

4

43

3

42

2

41

1

40

0

FY06

FY07

FY08

Thai Village

 
 
  Revenue Net profit

Revenue

  Revenue Net profit

Net profit

41

41 3

3

40

2

39

1

38

0

37

-1

36

-2

35

-3

FY06

FY07

FY08

Japan Foods

250

250 Revenue Net profit 10

Revenue

250 Revenue Net profit 10

Net profit

10

200

200 8

8

150

6

100

4

50

2

0

0

FY06

FY07

FY08

Food Empire Holdings

 

250

250 Revenue Net profit 25

Revenue

250 Revenue Net profit 25

Net profit

25

200

200 20

20

150

15

100

10

50

5

0

0

FY06

FY07

FY08

Apex-Pal

 

Revenue

  Revenue Net profit

Net profit

100

80

100 80 6 4
100 80 6 4

6

4

2

60

0

40

-2

20

-4

0

-6

[

6

]

FY06

FY07

FY08

Company outlook

Intention to expand in key markets – PRC and Singapore. Currently, BreadTalk derives most of its revenue from Singapore and the PRC. It intends to expand further in both nations. However the PRC market is much larger than Singapore. Thus, earnings from the former may become the group’s largest revenue source within five years. We expect this to sustain the group’s revenue growth over the next few years. Moving into fast-food dining. To ensure continued growth, BreadTalk will be investing part of its profits in the construction of new platforms and infrastructure for future revenue growth, such as the introduction of Carl’s Junior restaurants in the PRC. BreadTalk wants to open two Carl’s Junior restaurants in Shanghai this year and four ramen restaurants in Shanghai and Singapore in its venture into fast-food dining to further diversify its business offerings. Tighter cost management. Management aims to tighten its cost management to improve operating margins. In addition, it intends to invest more on IT so as to streamline operations and improve operating efficiency.

Figure 11: SWOT analysis

Strengths

Well-known brand with strong brand equity

Innovative products to keep up with changing customer tastes

Strategic retail locations, capturing strong market interest and creating brand awareness

Experienced management

Opportunities

Increasing popularity of bread products in Asia

Rising household income and affluence

Weaknesses

Intense competition

Low barriers to entry in the F&B industry

Threats

Vulnerable to food cost increases and supply shortages

Exposed to changes in consumer sentiment and preferences

Possibility of food contamination and adverse publicity

Failure to procure good locations for bakery outlets and restaurants

Source: Company, CIMB-GK Research

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Risks

A fiercely competitive industry. BreadTalk operates in the highly competitive F&B industry which has close to no barriers to entry. Some of its competitors are established players in the bakery and confectionery industries and may have greater financial and marketing resources. The entry of new competitors into the same F&B segments or into the immediate areas around the group’s retail outlets may affect its earnings. Subject to changing consumer tastes. Continued earnings growth would depend on the popularity of bakery items and other food products. Shifts in consumer preferences away from the group’s items may hurt its business. Exposure to food-related diseases. Some of BreadTalk’s products may contain food fillings made from meat and seafood products. Any outbreak of diseases in meat or seafood from the region and around the world may affect sales. Such outbreaks may also result in a shortage of key ingredients or higher costs, hurting margins. Lack of new strategic locations. Business volume would depend to a large extent on management’s ability to procure strategic locations for BreadTalk’s retail outlets. However, there is no assurance that this is possible, which would limit future growth. Higher rents demanded from landlords and failure to renew existing leases. All outlets are currently leased from third parties. Rental costs constitute a large portion of the group’s costs (20% of the total). As such, earnings are highly sensitive to any increase in rental expenses. In addition, upon expiry of leases, landlords have the right to review rental rates, which may not be favourable to the group. Quality control might be an issue due to staff shortage. The quality of food items may be affected by a change in or a shortage of staff or the lack of proper inspection by the in-house operations team.

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Financials

Revenue expectations of 12.6% CAGR for FY09-11. Revenue jumped 35.5% yoy in FY08, up from the 26.7% growth in FY07, led by higher revenue from more outlets and the disposal of its loss-making J. Co Donuts. However, we believe this growth rate is not sustainable due to the highly competitive nature of the food industry, which has close to no barriers to entry. Furthermore, a country’s GDP is closely related with consumer spending. With Singapore’s GDP contracting by more than 11% in the earlier part of the year, we expect BreadTalk’s revenue to grow at a more conservative 10-15% over FY09-11. This translates to a CAGR of 12.6%. Net profit forecast to grow at 29.3% CAGR over FY09-11. Net profit increased by 64.6% yoy in FY07, before slowing to 6.2% in FY08. The deceleration was blamed on its underperforming J.Co Donut business. However, this is no longer part of the group after the disposal of its 70%-owned Twin Peak Venture Singapore Pte Ltd. We expect profit growth to pick up to around 31% this year from the opening of new outlets in 2009 and lower raw material costs. We forecast a net profit CAGR of 29.3% for FY09-11.

Figure 12: Earnings

350 40% 300 35% 30% 250 25% 200 20% 150 15% 100 10% 50 5%
350
40%
300
35%
30%
250
25%
200
20%
150
15%
100
10%
50
5%
0
0%
FY07
FY08
FY09F
FY10F
FY11F
Rev enue
Net profit
Total rev enue y oy grow th (%)
Source: Company, CIMB-GK Research
Sales (S$ m)

Margins likely to improve due to higher ASPs and lower raw material costs. We expect gross margins to come in higher at 55% in FY09-11 from 54.4% in FY08, due to higher average selling prices (ASPs) and lower raw material costs. We expect operating margins to improve from FY08’s 6.2% due to greater economies of scale. Net margins are projected at 4.2-5.5% for FY09-11, up from 3.7% in FY08.

Figure 13: Margins 70% 54.4% 55.0% 55.0% 55.0% 60% 55.4% 50% 40% 30% Gross margin
Figure 13: Margins
70%
54.4%
55.0%
55.0%
55.0%
60%
55.4%
50%
40%
30%
Gross margin
Net margin
Operating margin
20%
7.8%
7.1%
8.0%
6.3%
6.2%
10%
4.7%
3.7%
4.2%
4.8%
5.5%
0%
FY07
FY08
FY09F
FY10F
FY11F

Source: Company, CIMB-GK Research

Projected capex of S$20m-35m for FY09-11. BreadTalk generated positive cash flows in FY07-08. We are projecting higher capex of S$35m for FY09, as the group will be opening more than 80 bakeries (some directly owned and others franchised) and six new food courts in the year. The group is also in a strong net cash position which is vital in tight credit markets.

Figure 14: Operating and free cash flows

65.0 55.0 Operating cash flow Free cash flow Net cash 45.0 35.0 25.0 15.0 5.0
65.0
55.0
Operating cash flow
Free cash flow
Net cash
45.0
35.0
25.0
15.0
5.0
(5.0)
FY07
FY08
FY09F
FY10F
FY11F
Source: Company, CIMB-GK Research
[
10
]
(S$ m)

Valuation and recommendation

Initiate with Buy and target price S$0.57. We initiate coverage of the stock with a BUY recommendation and a target price of S$0.57, based on sum-of-the-parts valuation. This translates to 34.1% upside. BreadTalk boasts a robust net profit CAGR of 29.3% for FY09-11 and is in a healthy cash position. Following worries regarding the global economy, we would be keeping a close eye on BreadTalk’s margins in its upcoming 2Q09 results.

Figure 15: Sum-of-the-parts valuation

 

FY09F net profit

P/E

Value

(S$ m)

multiple

(S$ m)

Assumptions

Singapore

5.5

9.7

53.3

pegged to local F&B industry average

China & HK

4.9

15.6

77.1

40% discount to the local F&B industry average due to the smaller scale of operations

Others

0.5

7.8

4.3

20% discount to Singapore's business to factor in lack of track record

Total

134.72

No. of shares

234.91

Valuation per share

$0.57

Source: CIMB-GK Research

Figure 16: Peer comparison table (F&B industry)

 

Bloomberg

ticker

Recom.

China Green

904 HK

O

Huiyuan

1886 HK

U

Mengniu

2319 HK

U

China Yurun

1068 HK

U

Tingyi

322 HK

N

Want Want

151 HK

O

CHINA QUANJUDE-A

002186 CH

NR

Simple average

Cerebos

CER SP

O

China Fishery

CFG SP

O

Pacific Andes

PAH SP

N

P Food

PFH SP

U

Petra Foods

PETRA SP

U

Synear

SYNF SP

U

Simple average

Total Simple average

 

Target

Price

price

(Local)

(Local)

7.52

6.12

5.47

3.00

15.52

8.35

11.16

8.38

11.68

11.25

3.69

3.52

27.31

NA

3.00

5.22

1.15

1.29

0.40

0.53

0.59

0.53

0.65

0.58

0.30

0.12

Mkt cap

(US$ m)

857

1,036

3,126

2,204

8,416

6,286

566

650

680

378

455

238

279

Core

P/E (x)

CY2009

11.8

35.2

32.0

16.5

25.4

20.0

41.2

26.0

11.0

7.5

6.0

5.9

11.2

16.6

9.7

17.8

CY2010

9.6

26.1

25.3

12.4

20.9

16.0

35.2

20.8

10.2

7.2

5.4

5.1

9.7

16.2

9.0

14.9

3-yr EPS

CAGR

(%)

17.3

31.8

206.0

30.3

25.5

22.1

14.1

49.6

7.4

(1.5)

0.6

(0.8)

26.9

(15.5)

2.9

26.2

P/BV

(x)

CY2009

2.1

1.5

3.7

2.9

6.3

5.9

NA

3.7

2.6

1.7

0.5

0.6

1.2

0.6

1.2

2.5

ROE

(%)

CY2009

20.8

4.6

13.0

18.7

26.8

31.5

10.7

18.0

24.2

24.9

11.0

10.4

11.3

3.9

14.3

16.1

Div

yield (%)

CY2009

2.8

0.8

0.3

1.6

2.0

3.0

NA

1.7

8.3

4.4

4.5

6.0

4.6

-

4.6

3.2

O = Outperform, N = Neutral, U = Underperform, NR= Stock not under CIMB-GK Research coverage, nm = Not meaningful Source: Bloomberg, CIMB-GK Research

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Technical analysis

Stock is a technical BUY. Due to the lack of trading volume, we have used a weekly chart to see how far the stock has rebounded. The stock has rallied strongly since April to the 38% FR levels at S$0.43. The weekly MACD is still positive but the weekly and daily RSI are now overbought. Despite the overbought RSI, we do not discount another rally towards the 50% FR levels at S$0.485. Investors looking to buy may want to wait a little before getting in. Wait for a pullback to S$0.39 or S$0.36 before getting. Put a stop loss at S$0.35.

Figure 17: Technical chart

to S$0.39 or S$0.36 before getting. Put a stop loss at S$0.35. Figure 17: Technical chart

Source: Bloomberg

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Board of directors

Figure 18: Management

George Quek Meng Tong Chairman

Mr Quek, founder of the group, was appointed to the board on 6 Mar 03 and re- elected on 28 Apr 08. With more than 30 years of industry experience, he has been instrumental in setting new standards in food trends in Asia and the Middle East. Mr Quek started his food and beverage business in Taiwan in 1982, successfully developing it into a chain of 21 South-East Asia food outlets within a decade. Returning to Singapore in 1992, he founded Topwin Singapore and Megabite China in 1996, establishing the food court business. In 2000, he started the bakery business with BreadTalk Pte Ltd and eventually listed it on the SGX in 2003. To facilitate expansion, the bakery and food court businesses were merged in 2005. Mr Quek holds a Doctorate in Business Administration (Honorary) from Wisconsin International University, US.

Katherine Lee Lih Leng Deputy Chairman

Ms Lee was appointed to the board on 6 Mar 03 and last re-elected on 30 Apr 07. She oversees research and development, as well as pioneers new ideas and concepts. Responsible for product development and brand enhancement locally

and globally, Ms. Lee also formulates product training and technical skill upgrade programmes. In addition, Ms. Lee spearheads product costing, which is an integral part of strategic pricing. Ms Lee has more than 15 years of experience in the industry. She was previously the Finance Director of Topwin Singapore prior to which she was in charge of the human resource and operations of more than

20

food and beverage outlets in Taiwan.

Chen Kuo Hua Non-Executive Director

Mr Chen Kuo Hua was appointed to the board on 30 Apr 03 and last re-elected on 27 Apr 06. He is in the Audit Committee, Nominating Committee and Remuneration Committee of the company and is also the President of the group’s China operations. Mr. Chen has more than 20 years of industry experience providing consultation and strategic planning in various countries. He had held various senior positions in Topwin Singapore and Megabite China prior to joining the group, when the food court business was merged into the group. Mr. Chen holds a degree in Drama and Mass Communication from the Chinese Culture University, Taipei, Taiwan.

Ong Kian Min Independent Director

Mr Ong Kian Min was appointed to the board on 30 Apr 03 and last re-elected on

30

Apr 07. He is the Lead Independent Director, Chairman of the Audit Committee

 

and Nominating Committee, and member of the Remuneration Committee of BreadTalk. He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. In addition to practising as a consultant with Drew & Napier LLC, he is a senior adviser of Alpha Advisory Pte. Ltd. (a financial and corporate advisory firm) and an executive director of Katana Asset Management Pte. Ltd. He also serves as an independent director and chairs most of the audit committees of other SGX-ST listed companies. Mr Ong holds a Bachelor of Laws (Honours) external degree from the University of London and a Bachelor of Science (Honours) degree from the Imperial College of Science and Technology in England. He has been a Member of Parliament in Singapore since

Jan 97, and serves as Deputy Chairman of the Government Parliamentary Committee for Transport.

Chan Soo Sen Independent Director

Mr Chan Soo Sen was appointed to the board on 14 Aug 06. He is the Chairman of the Remuneration Committee, as well as a member of the Audit Committee and Nominating Committee of the company. Mr. Chan is currently the Director, Chairman’s Office of Keppel Corporation Limited. He also holds directorships for a few listed companies in Singapore. Mr. Chan is a Member of Parliament for Joo Chiat Constituency. He was previously a Minister of State and served in several ministries including the Ministry of Community Development, Youth and Sports, Ministry of Education, and Ministry of Trade and Industry. Before entering politics, he was involved in the start-up of the China-Singapore Suzhou Industrial Park as its founding chief executive officer in 1994, laying the foundation and framework for infrastructure and utilities development for the industrial park. He holds a Master in Management Science from the University of Stanford, US.

Source: Company

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Financial Tables

PROFIT & LOSS (S$ m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates' contribution Exceptional items Pretax profit Tax Minority interests Net profit Wt. shares (m) Shares at year-end (m)

2007

2008

2009F

2010F

2011F

156.6

212.2

244.1

275.8

303.4

(64.8)

(89.1)

(73.0)

(78.5)

(81.5)

21.9

26.4

36.9

45.6

55.0

(9.8)

(13.1)

(21.4)

(26.0)

(30.6)

12.2

13.2

15.4

19.6

24.4

(0.9)

(1.2)

(1.7)

(1.7)

(1.8)

-

-

-

-

-

-

-

-

-

-

11.2

12.0

13.7

17.8

22.6

(2.8)

(3.6)

(2.7)

(3.6)

(4.5)

1.1

0.6

0.8

1.0

1.3

7.3

7.8

10.2

13.3

16.8

226.4

234.9

234.9

234.9

234.9

234.9

234.9

234.9

234.9

234.9

BALANCE SHEET (S$ m, FYE Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders' funds Minority interests NTA/share (S$)

2007

2008

2009F

2010F

2011F

44.9

58.2

71.7

65.7

55.1

9.7

9.2

9.2

9.2

9.2

2.0

2.4

2.4

2.4

2.4

56.6

69.8

83.4

77.4

66.7

35.5

44.7

36.4

52.0

75.0

2.5

3.9

4.5

5.1

5.6

3.0

4.8

5.7

6.4

7.1

18.0

24.0

28.5

30.2

33.8

59.1

77.3

75.1

93.7

121.4

8.9

11.6

13.4

15.1

16.6

7.0

9.7

9.7

9.7

9.7

47.2

61.5

62.1

61.2

62.0

63.0

82.9

85.2

86.0

88.3

4.0

6.4

6.4

6.4

6.4

1.5

1.8

1.8

1.8

1.8

5.4

8.2

8.2

8.2

8.2

44.1

52.5

60.8

71.5

85.0

3.2

3.6

4.4

5.4

6.7

0.3

0.4

0.4

0.4

0.6

CASH FLOW (S$ m, FYE Dec) Pretax profit Depreciation & non-cash adjustments Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2007

2008

2009F

2010F

2011F

11.2

12.0

13.7

17.8

22.6

12.2

16.1

21.4

26.0

30.6

7.3

8.0

0.3

0.4

0.4

(2.0)

(3.4)

(3.6)

(2.7)

(3.6)

-

-

-

-

-

28.7

32.7

31.8

41.5

50.0

(18.0)

(25.6)

(35.0)

(20.0)

(20.0)

(1.2)

(0.7)

-

-

-

2.3

0.0

0.0

0.0

0.0

(16.9)

(26.3)

(35.0)

(20.0)

(20.0)

(1.8)

4.8

(2.3)

-

-

11.8

0.9

-

-

-

(1.0)

(1.3)

(2.7)

(3.6)

(4.5)

(1.0)

(2.0)

(2.3)

(2.4)

(2.5)

7.9

2.3

(7.4)

(6.0)

(7.0)

19.8

8.8

(10.6)

15.6

23.0

21.6

4.0

(8.3)

15.6

23.0

24.6

28.6

20.3

35.9

58.9

KEY RATIOS (FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2007

2008

2009F

2010F

2011F

26.7

35.5

15.0

13.0

10.0

42.8

20.2

39.8

23.7

20.6

7.2

5.7

5.6

6.5

7.4

4.7

3.7

4.2

4.8

5.5

11.4

13.1

9.1

11.6

14.2

24.9

30.4

20.0

20.0

20.0

13.5

16.6

26.9

26.9

26.9

6.9

6.7

7.8

8.0

8.1

5.3

5.5

6.3

6.3

6.4

19.6

17.6

18.7

18.8

19.1

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