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Tasty Food & Beverage Shares In Singapore

As a Singaporean speaking on behalf of other Singaporeans, I daresay we love to eat. How nice would it be then, if Singaporean investors can parlay their love of life-sustaining food into life-enriching profits with successful and profitable food & beverage operators?

There are a handful of F&B companies listed in Singapore that run some great concepts and brands. For instance, Breadtalk (SGX: 5DA) not only makes the ubiquitous pork-floss buns at its namesake Breadtalk outlets, it also serves delectable Chinese cuisine at its award-winning Din Tai Fung restaurants.

Meanwhile, there’s also Tung Lok Restaurants (SGX: 540) that might give Din Tai Fung a run for its money in the Chinese cuisine department with its own TungLok brand of Chinese restaurants.

Shifting to cuisine from another part of the world, we have Japan Foods Holding (SGX: 5OI), which specialises in Japanese ramen through restaurant concepts like Ajisen Ramen, Menya Musashi and Menzo Butao among others. With 20 Ajisen Ramen outlets located throughout Singapore and a store count for Menya Musashi that has doubled from 3 in Sep 2012 to 6 in Sep 2013, it’s perhaps fair to say that there’s some healthy demand for the company’s ramen fare.

But while all three companies might serve delicious food in their own restaurants, tasty fare does not always equate to a profitable business.

For instance, even as Breadtalk and Japan Foods were able to remain solidly profitable over the past few years while generating growing cash flow, Tung Lok Restaurants have struggled to make a decent profit at times and had also suffered shrinking cash flows.

Net profit margin

Year

Breadtalk Japan Foods Tung Lok

2009

4.5%

8.1%

-3.7%

2010

3.7%

10.4%

0.8%

2011

3.2%

4.9%

4.3%

2012 2.7% 6.6%

-2.1%

Source: S&P Capital IQ

Operating cash flows (in S$, millions)

Year

Breadtalk

Japan Foods

Tung Lok

2009

39

5.4

1.2

2010

45

6.2

8.0

2011

49

6.7

8.1

2012

54

8.4

-0.1

Source: S&P Capital IQ

That disparity in their financial performance translated into a big difference in how their shares have performed since 5 years ago on 4 April 2009, a time when the stock market here in Singapore had just reached its trough during the Great Financial Crisis of 2008-2009.

Breadtalk and Japan Foods’ shares have gained 361% and 478% to their current prices of S$1.19 and S$0.61 respectively. In the process, they’ve also outperformed the market’s 76% return as represented by the Straits Times Index’s (SGX: ^STI) jump from 1,821 points to 3,211 points. And while Tung Lok Restaurants’ shares have beaten the market with an 89% increase in price to S$0.17, its shares’ return has paled in comparison with that of Breadtalk and Japan Foods.

Foolish Bottom Line

The experience of Breadtalk, Japan Foods Holding and Tung Lok Restaurants highlight how Singaporean investors might be able to profit from one of our favourite activities – eating.

At the same time however, it’s also good to be reminded of the fact that a restaurant providing a very desirable service need not necessarily be doing so in the most profitable way. It certainly pays to take a look beneath the hood for whichever company has managed to attract our attention based on the popularity of its good or service.

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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 writer Chong Ser Jing owns shares in Japan Foods Holding.