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Old Chang Kee Ltd’s Latest Earnings: What Investors Should Know

Old Chang Kee Ltd (SGX: 5ML) reported its second-quarter earnings for its financial year ending 31 March 2017 (FY2017) yesterday evening. The reporting period was for 1 July 2016 to 30 September 2016.

As a quick background, Old Chang Kee has been around since 1956, growing from a single stall outside Rex Cinema to 87 outlets today. Old Chang Kee may be best known for its signature Curry’O puff, popular Singapore snack.

You can catch up with the results from the company’s previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures from Old Chang Kee:

  1. Revenue for the reporting quarter was $20.3 million, up 5.9% compared to the same quarter a year ago.
  2. Profit for the period shot up 30.5% to $1.58 million.
  3. Subsequently, diluted earnings per share (EPS) rose from 1.0 cent in FY2016’s second quarter to 1.30 cents in the reporting quarter.
  4. Cash flow from operations came in at $2.03 million with capital expenditure clocking in around $1.57 million. This puts the food purveyor in positive free cash flow territory to the tune of nearly $460,000. This is down from the free cash flow of $696,000 million recorded in the same quarter last year.
  5. As of 30 September 2016, Old Chang Kee has $15.2 million in cash and equivalents and borrowings of about $7.8 million. This is a decline from the $21.1 million in cash and equivalents and borrowings of $8.5 million it had a year ago.
  6. The board has declared an interim dividend of $0.015 per share, unchanged from the year before.

In summary, Old Chang Kee’s top-line grew while its profit benefitted from lower expenses. The curry puff company also managed to maintain a net cash position on its balance sheet and generated free cash flow.

Operational highlights and the road ahead

Old Chang Kee’s revenue increased due to incremental revenue from new outlets and higher revenue from existing outlets. This was partially offset by store closures in malls which are undergoing revamps.

As of 30 September 2016, Old Chang Kee has 87 outlets in Singapore, compared to 84 outlets a year ago. The group’s signature puff products accounted for 33.4% of its revenue for the reporting quarter.

Old Chang Kee’s management team provided the following outlook in the earnings release:

“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. Retail conditions will continue to be challenging amidst mall revamps and with new entrants in the food and beverage market.

The Group believes that its new factory in Singapore when completed and operational, together with its Malaysia factory, will provide the platform for the Group to grow its business both locally and regionally, while keeping cost under control.”

At its closing share price yesterday of $0.75, Old Chang Kee traded at about 18.9 times trailing earnings with a dividend yield of 8%. Please note that the trailing dividend includes a one-off special dividend of $0.03 per share. Without the special dividend, Old Chang Kee would have a 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.