BreadTalk Group Ltd (5DA)

With the markets behaving as it is, I've been super busy watching the market and making my moves to ensure that we can pocket the gains and happily go on our holiday. Today, I shall delve into BreadTalk Group Ltd (BreadTalk) and how I am watching this stock like a hawk.

Source: BreadTalk Group Ltd website


I've always been keen to invest in the F&B sector and BreadTalk was one of those stocks that caught my eye due to its sheer ever growing presence in Singapore. I read its 2013 annual report and the key facts that caught my attention are:

1. Their current liabilities are greater than their current assets over the past few years
2. Gearing policy is between 60% to 80%
3. Many of their top twenty shareholders are financial institutions
4. They partially owned some properties in Singapore (Chijmes, Tripleone Somerset and 112 Katong) and China (Beijing Tongzhou) and
5. The key star (Din Tai Fung) in their restaurant business is a franchise which they have held since 2003

My main concern would be whether this franchise (Din Tai Fung) would be taken back in the years to come and how that would affect BreadTalk. I am also iffy on their finances and the high gearing policy is not palatable to me. Although I do know that they are in a way building up the company for the future with their property investments and constant expansion in Singapore and beyond, to me this would represent a growth stock given the paltry dividends. Currently the stock price is at 1.32 but if I would to buy this stock for capital gains, it has to be low enough, say 1.20 to 1.30 as I foresee that it would take mid to long term before I can harvest it for capital gains. 

Naturally, the recent news that they have invested S$3.96 million for its 50% of BreadTalk Thailand with Thailand's Minor Food Group was a positive talking point and hopefully that will translate to excellent results in the near future. Minor Food Group is a force to be reckoned with given its strong core brands such as Swensens, Thai Express, The Coffee Club etc and there have been market rumours that they could eventually take over BreadTalk.

BreadTalk is no newcomer to the Thai market, having been there since 2005. Currently they own 23 outlets (BreadTalk and Toast Box), 2 franchised Din Tai Fung and 3 Food Republic food atria. This joint venture could only mean good things and I hope that it would translate to a higher stock price in the mid term. 

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