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Value in Singapore’s Restaurants

foodSingapore food is one of the best in the world. But does good food necessarily mean tasty value investing opportunities amongst the many restaurants quoted on the Singapore Stock exchange?

There are 11 companies listed on the Singapore Stock Exchange that generate at least a third of their revenue through the serving of food. With a market capitalisation of S$390m and rapidly-growing revenues, BreadTalk (SGX: 5DA) is the largest of these companies.

With well-known fascias such as Toast Box, Din Tai Fung, and Ramen Play, BreadTalk arguably has a strong brand presence. Whilst this could make BreadTalk a solid investment for some, it might not necessarily be a screaming buy to value investors.

The company is valued at 28 times earnings; its yield is disappointingly-low at 1.3% and it is currently priced at 4.5 times book value. The smaller companies on the market do not provide much more in the way of inspiration, either.

Whilst BreadTalk is making a profit and has rising top-line sales and bottom-line profits, the opposite is true of LifeBrandz (SGX: L20) and Tung Lok Restaurants 2000 (SGX: 540). Both companies have made losses in the last 12 months. This notwithstanding, they are trading at three and six times book values, respectively. Furthermore, neither company pays a dividend.

Looking for value in the stock market requires a big heap of patience and a large dollop of discipline. Often it may be the case that companies with strong fundamentals simply won’t be trading at the bargain price that a value investor requires.

With that in mind, it might be worth giving the restaurant industry a miss at current prices.

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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 Adam Kuo doesn’t own shares in any companies mentioned.