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

Yesterday, Old Chang Kee Ltd (SGX: 5ML) reported in its first-quarter earnings for the fiscal year ending 31 March 2018 (FY2018). The reporting period was for 1 April 2017 to 30 June 2017.

Old Chang Kee has been around since 1956, growing from a single stall outside Rex Cinema to 89 outlets today. Old Chang Kee may be best known for its signature Curry’O puff, a popular Singapore snack.

You can read more about Old Chang Kee here and here or catch up with the previous earnings report here.

Financial highlights

Here’s a rundown on the financial figures for the fiscal first-quarter:

1. Revenue was $20.6 million, up 10.7% compared to a year ago.

2. Profit for the period fell 25.8% to $0.67 million.  

3. Diluted earnings per share (EPS) fell from 0.74 cents in FY2017’s first-quarter to 0.55 cents in the reporting quarter.

4. Cash flow from operations was $1.5 million with capital expenditure at $2.65 million. Old Chang Kee had negative free cash flow of $1.15 million.   

5. As of 30 June 2017, Old Chang Kee had $15.2 million in cash and equivalents and borrowings of about $11.9 million. A year ago, it had $20.5 million in cash and equivalents and borrowings of about $8 million.  

In all, Old Chang Kee’s sales was up nicely but profits lagged. The curry puff company managed to maintain a net cash position on its balance sheet but generated negative free cash flow.

Operational Highlights

Revenue benefitted from the opening of new outlets, coupled with higher revenue from existing outlets. As of 30 June 2017, the Group had 89 outlets in Singapore, an increase compared to 85 outlets a year ago. The group’s signature puff products accounted for 33.6% of its revenue for the quarter.

The management team provided this outlook:

“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 will be integrating its factory in Iskandar Malaysia and its expanded factory facilities in Singapore at 2 and 4 Woodlands Terrace in the coming months. These will provide the Group with a platform to expand its product range and increase its production efficiency, and grow its business both locally and regionally.”

Foolish take away

At its closing price of $0.805 yesterday, Old Chang Kee traded at 64.4 times earnings and had a dividend yield of 1.8%.  

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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.