3 Things Investors Should Know About BreadTalk Group Limited’s Restaurant Business

BreadTalk Group Limited (SGX: 5DA) is a food & beverage retail company that has three main business segments: Bakery, Restaurant, and Food Atrium.

The company reported its 2017 second quarter results earlier this month. In this article, I want to look at some useful information about the Restaurant segment that was shared in the company’s earnings presentation.

As a quick introduction, BreadTalk’s Restaurant segment comprises mainly of the following restaurant brands: Ding Tai Fung, Ramen Play, and Sanpou-Tei.

Historical financials

The two charts below show the Restaurant segment’s revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) going back to 2010:

Source: BreadTalk 2017 second quarter earnings presentation

We can see that the Restaurant segment’s revenue has grown at an impressive compounded annual growth rate (CAGR) of 15.1% from 2010 to 2016.

Furthermore, its EBITDA margin has doubled from 10.1% to 20.3% over the same period, resulting in the segment’s EBITDA compounding at 32.3% per year.

Change in outlet count

In the following chart, you can see how the Restaurant segment’s outlet count has changed since 2006:

Source: BreadTalk 2017 second quarter earnings presentation

The company’s restaurant count has grown from just five in 2006 to 30 in the first half of 2017. Of the 30 outlets, Ding Tai Fung accounts for 24, and Ramen Play accounts for three.

Revenue by geography

Here’s a chart showing the Restaurant segment’s revenue breakdown by geography:

Source: BreadTalk 2017 second quarter earnings presentation

BreadTalk’s Restaurant segment is highly concentrated in Singapore (93% of the segment’s revenue in the first half of 2017) with Thailand accounting for the rest. But, the company is in the process of widening the segment’s geographic exposure: BreadTalk will be opening its first Din Tai Fung restaurant in London in the near future.

A Foolish conclusion

In conclusion, the Restaurant segment of BreadTalk has been growing over the years in term of revenues, outlets, and profitability.

Going forward, the expansion into Europe – the planned Ding Tai Fung restaurant opening in London – could pave the way for BreadTalk’s Restaurant segment to continue growing.

Editor's note: Articles covering BreadTalk's Food Atrium and Bakery segments have been published. They can be found here and here, respectively.

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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.