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Singapore’s Cheapest Restaurants

foodThere is something quite unique about food in Singapore. Just the mention of it can set the taste buds alight – even if you are not that hungry.

Perhaps it is the interesting intermixing of Asian spices that sends many a local diner drooling. Then again, it might be the flawless fusion of fares from the various cultures over the years that has helped to elevate Singapore food above cuisines from many other parts of the world.

If you don’t believe just how much Singaporeans love their food, you only have to turn up at any food court at lunch time to experience it at first hand. But as investors, we not only have the opportunity to sample and relish the fare but, possibly, enjoy the financial delights of some of these companies too.

Interestingly, the market values no fewer than eight quoted restaurants below the revenues they have generated in the last 12 months. In other words the price-to-sales ratio is less than one. That might suggest that some of these restaurants may be cheap.

Tung Lok Restaurants 2000 (Catlist: 540) is valued at just 0.3 times sales. The company operates 22 outlets of which 13 are in Singapore. Its other restaurants include two in China and one is in New Delhi. The company is more than capable of generating a gross profit. However high overheads leave little left over for the bottom line.

It is hard to go around Singapore without coming across the ubiquitous Toast Box outlets, which is owned by BreadTalk Group (SGX: 5DA). The company also runs Food Republic, Ding Tai Fung and, unsurprisingly, the many Bread Talk shops. BreadTalk is valued at 0.6 times trailing twelve months’ revenues. But it is also valued at a lofty 26 times profit.

Auric Pacific Group (SGX: A23), which operates the Delifrance franchise in Singapore also runs food courts through its 61% stake in Food Junction. Both companies are valued at around 40% of their revenues in the last year. Auric Pacific has seen its profits rise from around S$8m to S$12m, even though revenues have been largely static.

I am not even going to pretend to know anything about hip-hop but Life Brandz (SGX: L20) clearly does. It operates a portfolio of Food & Beverage establishments that include Dream in River Valley Road and Rebel in Clarke Quay. It also runs Mulligan’s for those who might prefer a quiet pie and pint. Life Brandz is currently valued at 60% of its total revenues. It has only been profitable once in the last six years.

Japan Food Holdings (Catlist: 5OI) has seen its turnover jump from S$27m in 2008 to over S$60m last year. Profits have risen from S$2.8m to S$4.9m. The company, which is valued at 0.9 times revenue, serves Japanese fare under a number of banners that include Ajisen Ramen and Aoba. In total it has 55 outlets in Singapore, Malaysia, Indonesia and Vietnam. It even pays a dividend, which it recently doubled to S$0.02 a share.

Other quoted restaurants in Singapore include ChasWood Resources (SGX: 5TW), which operates casual dining outlets in Malaysia, Thai Village Holdings (SGX: 596), which has one restaurant in Goodwood Park Hotel, Soup Restaurant (SGX: 5KI) and ABR Holdings (SGX: 533), which runs Swensen’s.

The restaurant business in Singapore is highly competitive. It has low barriers to entry, which means that just about anyone with a recipe and some cooking utensils can consider setting up a food outlet. That might explain why the market attaches low ratings to some of these companies. But for those with a unique selling proposition there are queues of eager diners waiting to beat a path to their doors.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.