Put Your Money Where Your Mouth Is

Singapore is well known for its variety of food cultures and cuisines. Despite being a small nation, the diverse cultures present in Singapore bring together a melting pot of cuisine in one small island. From Hainanese Chicken Rice to Roti Prata to even exquisite French cuisine, if you want to eat it, Singapore has it. Many Singaporeans live to eat rather than eat to live. Correspondingly, there are a number of Food & Beverage companies listed in the Singapore Exchange. Currently, there are at least 10 listed companies that generated more than a third of their revenues from restaurants in the last financial year with an aggregate market capitalisation of S$792 million. Let’s take a look at three household names.

BreadTalk Group Limited (SGX: 5DA)

When many people talked about BreadTalk, they have no idea that BreadTalk Group actually has 48% of its revenue coming from restaurants besides their BreadTalk outlets. Some are surprised at the number of familiar brands associated with BreadTalk; including Food Republic, RamenPlay, and Din Tai Fung. Breadtalk has managed to nearly double its revenue from S$246m in 2009 to S$447m in 2013. However, net profits have not moved much throughout the years due to rising raw material and labor costs. Nevertheless, Breadtalk shares have performed well throughout the same period, rising from S$0.30 to a recent S$0.91 – a remarkable 300% return! Its P/E ratio currently stands at 20.87 and sports a dividend yield of 1.43%.

Japan Food Holdings Limited (SGX: 5OI)

As you would have guessed it from the name, Japan Foods Holding is principally engaged in the operation of Japan-themed restaurants under various brands in Singapore and Malaysia and the franchising of the “Ajisen Ramen” and “Aji Tei” brands too.

Personally, I am impressed at how the company has chosen to co-locate an Ajisen Ramen and Fruit Paradise outlet together in Ang Mo Kio Hub, and still have open an “Udon King” at the basement floor. The ability to open 3 stores (under the different brand names) in the same shopping mall demonstrates its ability to capture a significant market share of casual diners.

Not surprisingly, Japan Food has surged almost 340% from S$0.177 to S$0.60 within a short 2 years. It can be testament to the growing revenue and net profits over the past 5 years since year 2008 and its stable of brands which consumers are familiar with. It is currently trading at a 14.4 times earnings and delivers a 2.33% dividend yield.

ABR (SGX: 533)

ABR Holdings primarily manages franchises, and operates a portfolio of food and beverage companies and brands; these include Swensen’s, Yogen Fruz, Gloria Jean’s Coffees, Oishi Pizza, Season Confectionary & Café, Hippopotamus, and Tip Top Curry Puff.

Despite the fluctuation in its net profits and divestment of the entire stake in Focus Network Agencies for the Chocolate Retail and Distribution segment, ABR shares also had an exceptional run-up from S$0.16 in 2009 to S$0.765, up 478%! It is currently have a P/E ratio of 1.91 and dividend yield of 2.61%. It is worth taking note that the earnings are inflated due to the divestment and recorded gains of around S$70m.

Foolish Bottom-line

The next investing opportunity might very well show up in your everyday life. You just need to pay a little more attention and open your mind up to investing opportunities around you, and you might just find it at your next meal out!

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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 contributor James Yeo doesn’t own shares in any companies mentioned.