Old Chang Kee Ltd’s Latest Earnings: Puffing Up Nicely

Old Chang Kee Ltd (SGX: 5ML) reported its second-quarter earnings  for the fiscal year ending 31 March 2016 (FY2016) last Friday. The reporting period was for 1 July 2015 to 30 September 2015.

Old Chang Kee has been around since 1956, growing from a single stall outside Rex Cinema to more than 80 stalls in Singapore today. The company is best known for its signature Curry Puff which is popular among Singaporeans. You can read more about Old Chang Kee in here and here.

Financial highlights

The following’s a quick summary of the latest financial figures from Old Chang Kee:

  1. Revenue for the reporting quarter was $19.1 million, up 5% compared to the same quarter a year ago.
  2. Profit for the period did better, moving up 14.6% year-on-year to $1.2 million.
  3. Consequently, earnings per share (EPS) increased from 0.87 cents in the second-quarter last fiscal year to 1.0 cents in the reporting quarter.
  4. Cash flow from operations came in at $2.2 million with capital expenditures clocking in around $1.5 million. This puts the food purveyor in positive free cash flow territory to the tune of $0.7 million. This is an improvement from the negative free cash flow recorded in the same quarter last year.
  5. As of 30 September 2015, Old Chang Kee had $21.3 million in cash and equivalents and borrowings of just around $1.0 million.

In summary, Old Chang Kee demonstrated solid top-line and bottom-line growth for the reporting quarter. The company’s free cash flow generation was also respectable and its balance sheet stayed strong. A dividend of 1.5 cents per share was also declared, unchanged from the year before.

Operational highlights

Revenue increased primarily mainly due to incremental sales contributions from new outlets and higher revenue from existing outlets. As of 30 September 2015, the Group operated a total of 84 outlets in Singapore, compared to 79 outlets a year ago.

In Old Chang Kee’s earnings release, management gave the following commentary for the current year and the outlook ahead:

“The Group expects operating lease expenses (rental) and labour and raw material costs to remain high in the next reporting period and the next 12 months, and believes that the labour market will continue to remain tight. The Group’s enlarged factory facilities in Singapore and Iskandar Malaysia, when fully operational in the coming months, will provide the platform for the Group to grow its business both locally and regionally”

Foolish take away

At its closing price of $0.73 last Friday, Old Chang Kee traded at around 16.5 times its trailing earnings and has a dividend yield of 4%.

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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.