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10 Quick Things That Investors Should Know About Japan Foods Holding Ltd’s Latest Earnings Update

Last week, Japan Foods Holding Ltd (SGX: 5OI) released its 2019 first quarter (1Q FY19) earnings update. As a quick introduction, Japan Foods is a Japanese restaurant chains in Singapore, operating a number of brands such as “Ajisen Ramen”, “Osaka Ohsho” and “Menya Musashi”. It has also expanded beyond Singapore to Malaysia, Vietnam, Hong Kong and Mainland China.

Here are 10 things that investors should know from the latest earnings update:

1. Revenue for the reporting quarter grew by 2.7% year-on-year to S$16.6 million.

2. Gross profit climbed 2.4% year-on-year to S$14.1 million.

3. Yet, net profit for the quarter fell 7.6% year-on-year to S$1.0 million.

4. Similarly, Japan Foods’ earnings per share also declined by 6.7% to 0.56 cents.

5. The company’s gross margin dropped marginally from 85% in the first quarter of FY2018 to 84.8% in the latest quarter. This was due to lower gross margin attributable to certain new brands.

6. In the reporting quarter, Japan Foods generated operating cash flow of S$3.4 million, up from S$2.5 million in the corresponding quarter last year.

7. Japan Foods had no borrowings as of 30 June 2018, while its cash and bank balances stood at S$24.5 million.

8. Japan Foods’ restaurant count in Singapore increased from 45 restaurants, as of 30 June 2017, to 51 restaurants, as of 30 June 2018. Similarly, its overseas network expanded to 22 restaurants from 20 restaurants.

9. The Group recently launched two new franchise brands, “Konjiki Hototogisu” and “Kagurazaka Saryo” from Japan. Also, it acquired a 30% equity interest in PT Menya Musashi Indonesia, which opened its first Menya Musashi brand restaurant in Jakarta in April 2018.

10. In its earnings update, Japan Foods gave some useful comments on its outlook:

“The operating environment in the local food and beverage industry is expected to remain challenging in the next 12 months mainly due to intense competition, tight labour supply, rising business costs and uncertain economic outlook.

The Group will continue to focus its efforts in controlling raw material costs, improving operational efficiency via streamlining of work processes and technology and practising good restaurant portfolio management taking into account market demand and individual outlet’s profitability.”

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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.