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How Does The Market-Beating Japan Foods Holding Ltd Earn Money?

Japan Foods Holding Ltd (SGX: 5OI) is a stock that has done really well over the past five years. Including dividends, the company has generated a total gain of 90.8%, far in excess of the Straits Times Index’s (SGX: ^STI) dividend-adjusted return of 25.8% over the same period.

Given the company’s strong performance, investors may be interested in it. One of the key things to understand about a company when you’re analysing it is to have a good grasp of how it makes its money. So, let’s run through how Japan Foods earns revenue.

Brands

Simply put, Japan Foods is a restaurant and food court outlet operator, and so it is not a difficult business to understand. In its annual report for its fiscal year ended 31 March 2017 (FY2017), Japan Foods listed a total of 15 food & beverage brands under its umbrella. Of these, four are self-developed, while 11 are franchised.

The self-developed brands include Dutch Baby Café, Fruit Paradise, Ginza Kushi-Katsu and Japanese Gourmet Town. As the for the franchised brands, they include Ajisen Ramen, Botejyu, Botejyu San, Menya Musashi, Kazokutei, Osaka Ohsho, New Man Lee Bak Kut Teh, Hanamidori, Keika Ramen, Menzo Butao and Yonehachi.

The company’s brand-profile has gone through some changes since the end of FY2017. As of 31 December 2017, it had a total of eight franchised brands, and five self-developed brands.


Source: Japan Foods earnings presentation

The chart above shows the company’s current portfolio of restaurant and food court outlet brands.

Network of outlets

As of 31 March 2017, Japan Foods had 50 self-operated restaurants and a food court outlet in Singapore. It also had five outlets in Malaysia and Vietnam through sub-franchisees, and 13 outlets in China and Hong Kong through associated companies.

These numbers have also gone through some changes. At the end of 2017, the company had 49 self-operated restaurants and a food court outlet in Singapore. Its sub-franchisees ran four restaurants, while its associated companies ran 18 restaurants; all 22 of the non-self-operated restaurants are outside Singapore.

Outlet breakdown

Here’s a table showing a breakdown of the company’s restaurant count in Singapore by brands at the end of 2017:


Source: Japan Foods earnings presentation

As you can see, the Ajisen Ramen and Menya Musashi chain of Japanese ramen restaurants are the most important businesses for Japan Foods in Singapore. When it comes to overseas, the two brands are again the mainstays, as shown in the table below:


Source: Japan Foods earnings presentation

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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.