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The Three Numbers That Nourish Yeo Hiap Seng

YeoHiapSengLogoA quick rummage through your kitchen cupboards or refrigerator is likely to reveal the vast range of food stuff produced by Yeo Hiap Seng (SGX: Y03). The company, which is often known as Yeo’s, is one of Singapore’s largest food producers with a market value of almost S$1.5b.

Yeo Hiap Seng is good at delivering shareholder returns. With a Return on Equity approaching 11%, the company’s shareholders enjoy similar returns on their invested capital as Singapore’s blue chips. The average RoE for the 30 companies that comprise the Straits Times Index (SGX: ^STI) is 11.4%.

Yeo’s has achieved this through a gradually improving Net Income Margin. In 2010, its Net Margin was a below-average 6.7%. But this improved to 9.6% in 2011 and last year it was 12.4%.

The company, which pioneered the bottling of soy milk, is also quite good at getting the best from the assets employed in the business. Its Asset Turnover of 0.73 is higher than the blue-chip average of 0.5. It implies that Yeo’s is generating around $7 in revenue from every $10 of assets employed in the business.

Yeo’s, which was one of the first food producers to put chicken curry into tins, has achieved this without too much debt. Its Leverage Ratio of 1.2 is below the market average of 1.7.

By putting together the various ingredients of Yeo Hiap Seng’s business, it is easy to see how the company nourishes shareholders. Its Return on Equity of 11% is the product of a Net Income Margin of 12.4%; an efficient Asset Turnover of 0.73 and a modest Leverage Ratio of 1.2.

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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.