Tasty Value In Singapore’s Food Manufacturers

foodThere are around 30 companies listed on the Singapore Stock Exchange that generate more than half of their income by making food. This involves producing, and processing through to marketing of the foodstuff.

Of these 30 companies, two stood out. They were China Minzhong Food Corporation Limited (SGX: K2N) and Yamada Green Resources (SGX: MC7).

Both companies are headquartered in China. Both are involved in the production, processing and sale of vegetables.

China Minzhong, which is a subsidiary of Indonesia’s Indofood Sukses Makmur, was founded in 1971. It is an integrated vegetable processing company, which means it cultivates, produces and sells processed and fresh vegetables.

Yamada Green Resources cultivates and sell edible fungi. Its two main products are shitake mushrooms and black fungus. Its customers are located primarily in China and Japan.

Both companies are trading at around five times profits, which is almost a third of the current market average of 14. They are also trading at around half their book values.

Disappointingly, though, neither offers a great dividend yield. China Minzhong’s yield at 2% is slightly better than Yamada’s payout which works out at 1.6%.

China Minzhong has cash on its books rather than debt. Yamada, on the other hand carries some debt, but the loans appear fairly insignificant.

On the face of it, both China Minzhong and Yamada Green Resources look ostensibly cheap, especially when compared to, say, BreadTalk (SGX: 5DA). Singapore’s standout food producer is valued at 30 times earnings; 4.5 times its book value and yields around 1.3%.

However, Chinese shares, in general, are cheap and they can be cheap for a variety of reasons. Currently, the benchmark Shanghai Composite Index is only valued at 10 times earnings, which is not expensive when compared to, say, the Straits Times Index. Our Singapore shares are valued at around 14 times earnings.

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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.