With more than 750 shares listed in Singapore, there are bound to be a few companies that investors have never heard of. But from my observations, there are a number of reasons why it is companies with the smaller market capitalisations that are lesser-known: Investors who equate size to safety would often bypass shares that are not part of the Straits Times Index (SGX: ^STI) as they think that only blue chips (with their big market caps) can offer the safety they seek. Companies with smaller market caps tend to fly under the radar of investors as there’s a lack…
With more than 750 shares listed in Singapore, there are bound to be a few companies that investors have never heard of. But from my observations, there are a number of reasons why it is companies with the smaller market capitalisations that are lesser-known:
- Investors who equate size to safety would often bypass shares that are not part of the Straits Times Index (SGX: ^STI) as they think that only blue chips (with their big market caps) can offer the safety they seek.
- Companies with smaller market caps tend to fly under the radar of investors as there’s a lack of coverage and reports from brokerages here.
- Most of the smaller firms do not have dedicated investor relations teams to help them with publicity and this results in them having lower media coverage.
It can be a pity for companies with smaller market caps to be lesser known as some of them might have strong businesses.
With all these in mind, let’s take a look at two companies which may be good consumer plays in the Food & Beverage sector with their ability to generate growing revenue from their businesses.
1. Chew’s Group Ltd (SGX: 5SY)
With more than 30 years of history, Chew’s Group is one of the leading producers and suppliers of fresh eggs in Singapore. The company’s farm is also the first in Singapore to be awarded the ISO 9001:2008 and HACCP certifications.
Besides producing and selling generic eggs, the company also specializes in the production and sale of “Designer Eggs” under its Chew’s brand. Such eggs are specially designed to contain special nutrients. For instance, the company’s Cordyceps Fresh Eggs and Omega-3 Freshh Eggs contain cordycepin (a key component in cordyceps sinesis) and Omega-3 fatty acids respectively.
Source: S&P Capital IQ
Eggs are widely consumed in Singapore and the company has been able to translate this appetite into consistently growing revenue as seen in the chart above.
Chew’s Group’s shares last traded at S$0.29 yesterday. At that price, the company carries a trailing price/earnings ratio of 12 and a historical dividend yield of 1.5% (based on its dividend for its last completed financial year). For some perspective on the company’s valuation, the SPDR STI ETF (SGX: ES3) carries a trailing PE ratio of 13.6 currently; the SPDR STI ETF is a proxy for the Straits Times Index.
The company’s unique product, lower-than-average PE ratio, and steady top-line growth might make it worthy of further study for investors.
2. ABR Holdings Limited (SGX: 533)
Founded in 1979, ABR started out as the owner and operator of the first full-service Swensen’s restaurant in Singapore. Today, ABR’s portfolio has expanded massively with 20 Swensen’s restaurants in Singapore and a host of other F&B brands like Gloria Jean’s Coffees, Hippopotamus Restaurant Grill, Yogen Fruz, Tip Top Curry Puff and Oishi Pizza.
In a similar vein to Chew’s Group, ABR’s F&B business has also brought in steadily growing revenue as seen in the chart below:
Source: S&P Capital IQ
ABR last changed hands at S$0.73 and its PE ratio stands at 17. Despite the company’s slightly higher-than-average valuation, it does carry a decent historical dividend yield of 3.4% based on its dividend for 2013. Investors wanting a piece of one of Singapore’s more popular full-service restaurants might want to dig deeper into ABR.
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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.