A Close Look At BreadTalk Group Limited’s Growth, Dividend, And Valuation

Food and beverage retailer BreadTalk Group Limited (SGX: 5DA) has been a solid winner in Singapore’s stock market over the past five years – its shares are up by 91%. In contrast, the Straits Times Index (SGX: ^STI) has gained merely 2%.

Here are three important aspects about BreadTalk that may interest investors, namely, its growth, dividend, and valuation.

1. Growth

The table below shows how BreadTalk’s revenue and earnings per share have grown from 2011 to 2015:

Source: S&P Global Market Intelligence

Despite its revenue growing at a compound annual rate of 14% from 2011 to 2015, BreadTalk’s earnings per share has actually declined sharply from S$0.0412 to S$0.027.

2. Dividend

At its current share price of S$1.005, BreadTalk has a dividend yield of 1.5% thanks to its trailing dividend of S$0.015 per share. For perspective, this is lower than the SPDR STI ETF’s (SGX: ES3) yield of 3.22%. The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of the Straits Times Index.

We can also try to assess the sustainability of the company’s dividend by looking at two financial ratios: the debt-to-shareholders’ equity ratio and the pay-out ratio. But, do bear in mind that there are many other things to look at beyond the two ratios.

In any case, the debt-to-shareholders’ equity can be a gauge for the amount of financial risks a company is taking on while the pay-out ratio measures a company’s dividend as a percentage of its profit. In general, the lower the two ratios are, the better it could be.

Based on its latest financials (as of 30 June 2016), BreadTalk has a debt-to-shareholders’ equity ratio of 159%. The company’s trailing earnings of S$0.0230 per share also gives it a pay-out ratio of 65.

3. Valuation

We’ve already seen BreadTalk Group’s trailing earnings per share and share price. We thus know that the company has a price-to-earnings ratio of 44.

There are two things to note here. First, BreadTalk’s PE ratio is near a five-year high as shown in the chart below:

Source: S&P Global Market Intelligence

Second, the food and beverage company’s valuation is higher than the PE ratio of 12 that the SPDR STI ETF has.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.