Where to Next for Steady Dividend Payer Old Chang Kee? – Part 1

Credit: www.SeniorLiving.Org

Shares of Old Chang Kee Ltd (SGX: 5ML), has outperformed over the last six years. The company’s shares are up 300% from 1 Jan 2009 to its closing price of $0.80 last Friday (26 December 2014). In comparison, the capital gain returns of the SPDR STI ETF (SGX: ES3) was 80.3% for the same duration. The SPDR STI ETF is a proxy for the market barometer, Straits Times Index (SGX: ^STI).

Over the past six years between 2009 and 2014, Old Chang Kee has distributed a steady annual dividend totaling around 14 cents per share.

Financial Year Dividend per share (Singapore cents)
2009 2.8
2010 1.5
2011 / 2012 1.5
2013 6.5
2014 1.5

Source: Company Earnings Report; reporting period changed in FY2011/2012; FY2011/2012 represents a 15-month reporting period

Although the shares of Old Chang Kee has outpaced the market and its dividend has remained steady, as Foolish investors, we should look behind the curtain to understand how the firm can support its dividend in the future.

A closer look

Old Chang Kee has been around since 1956, growing from a single stall outside Rex Cinema to 80 outlets as of the financial year ended 31 March 2014 (FY2014). You can find out more about the history of Old Chang Kee here. The food chain outlet is best known for its signature Curry’O puff which is popular among Singaporeans alike. It’s no secret that Singaporeans love curry — its puff products made up about one of every three products sold in FY2014.

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Source: Company Earnings Report; reporting period changed in FY2010/2011; FY2010/2011 represents a 15 month reporting period

Old Chang Kee managed to grow its topline at an annualized compounded rate of 5.6% for the five financial years above. During this time, the curry puff purveyor increased its store count by 5.3% going from 76 outlets in the financial year ended 31 December 2009 (FY2009) to 80 outlets in FY2014. As the company had grown its sales by 33.5% over the period, we can conclude that the firm did that by expand sales from its existing outlets for this five plus year period. That’s pretty good to know.

At the time of writing, Old Chang Kee had one outlet in Australia, nine outlets in Indonesia and four outlets in Malaysia. It had also expanded into new food retail concepts such as Pie Kia, Curry Times, Dip n’ Go and Mushroom. The Curry Times at Westgate mall appears to be packed every time I walk past, so there could be something more to it.

Foolish summary

The exercise above is to look at the sales alone. As a next step, we should observe if the topline growth trickles down to the bottom-line for it to sustain its growth in share price. You can read more in the next article here.

As of the closing price on 26 December 2014 of $0.80, Old Chang Kee traded at a trailing earnings ratio of about 20, and has a dividend yield of around 3.8%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.