SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

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Equity Bottom-Up

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Kimly, Koufu, Jumbo, ABR Holdings, and Japan Foods Holding are the 5 biggest SGX-listed Restaurant stocks by market capitalisation, with a total capitalisation of over S$1.2 billion. Stocks that focused on dine in restaurant operations remained resilient amidst the evolving rules and regulations during the COVID-19 pandemic.  
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There have been four main periods that illustrated the change in dine-in rules and regulations ever since the start of circuit breaker last year, alternating between dining-in allowed and disallowed. Most restaurants admitted that these restrictions have hindered their operations and hence negatively impacted businesses. 
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	<li>Kimly reported that the Group’s revenue rose by 14.2% with approximately S$15.3 million from S$107.4 million in 1HFY20 to S$122.6 million in 1HFY21. Kimly attributes their strong growth to revenue contribution from the Food Retail Division, Outlet Investment Business Division, and the Outlet Management Division</li>
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Restaurant stocks remained resilient 
Stocks that focused on dine in restaurant operations remained resilient amidst the constantly evolving rules and regulations that posed threats to the F&amp;B industry. <a href="https://www.sgx.com/securities/equities/1D0">Kimly</a>, <a href="https://www.sgx.com/securities/equities/VL6">Koufu</a>, <a href="https://www.sgx.com/securities/equities/42R">Jumbo</a>, <a href="https://www.sgx.com/securities/equities/533">ABR Holdings</a>, and <a href="https://www.sgx.com/securities/equities/5OI">Japan Foods Holding</a> were among the top 5 in this sector based on market capitalisation, with a total capitalisation of over S$1.2 billion. 
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 <img src='https://api2.sgx.com/sites/default/files/2021-07/Capture_15.PNG' alt='Market Capitalization of Top 5 Restaurants stocks' />
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 <div class='content-caption'>Market Capitalization of Top 5 Restaurants stocks</div>
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<html><body>Timeline of Singapore Government’s COVID-19 Dine-in Rules 
There have been 4 main periods that illustrated the change in dine-in rules and regulations ever since the start of circuit breaker last year, alternating between dining-in allowed and disallowed. Most restaurants admitted that these restrictions have hindered their operations and hence negatively impacted businesses. However, this did not stop them from innovating and evolving their business strategy to tide through the pandemic. With the support of government grants and subsidies, restaurant stocks remained resilient, with some even experiencing significant growth in their revenue.</body></html>

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 <img src='https://api2.sgx.com/sites/default/files/2021-07/IMG_0200.jpg' alt='Period 1 - 4' />
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 <div class='content-caption'>Period 1 - 4</div>
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<html><body>Strong Performance with Growing Revenue 
Kimly reported that the Group’s revenue rose by 14.2% with approximately S$15.3 million from S$107.4 million in 1H FY2020 to S$122.6 million in 1H FY2021. Kimly attributes their strong growth to revenue contribution from the Food Retail Division, Outlet Investment Business Division, and the Outlet Management Division. In addition, the Group’s change in last done price indicated continuous growth with 16%, 48%, 12%, and 5% in Periods 1,2,3, and 4, respectively.  By altering their business strategies, the Group successfully hinged on opportunities presented by the ongoing pandemic. Revenue contribution from the Food Retail Division increased by S$9.5 million from S$50.4 million in 1H FY2020 to S$59.9 million in 1H FY2021 due to various factors including the increase in food delivery sales by S$3.7 million. The strategic locations of the Group's food outlets in the HDB heartlands that span across Singapore, provides the Group with a competitive advantage to serve an increased footfall arising from the people working from home and dining-in at the F&amp;B establishments which have been allowed since 19 June 2020 with the lifting of COVID-19 restrictions. Revenue contribution from the Outlet Investment Business Division increased by S$3.0 million from S$0.7 million in 1H FY2020 to S$3.7 million in 1H FY2021. This was mainly contributed by the sale of beverages and tobacco products, rental income and provision of cleaning and utilities services from food outlet properties acquired in 2H FY2020. Revenue contribution from the Outlet Management Division increased by S$2.7 million from S$56.3 million in 1H FY2020 to S$59.0 million in 1H FY2021 due to revenue contribution of new and existing coffee shops. In addition, Kimly also announced entry into a joint venture agreement to operate and manage short-term HDB coffee shop lease and 2 acquisitions – 60% of the shares in Klovex Holdings and 75% of the stake in Tenderfresh business. 
Continuous Growth 
Japan Foods Holding was the next most defensive stock after Kimly of the five stocks with price gains of 29.5% across the four main periods. The Group’s revenue started to pick up when Singapore moved into Phase 2 of the CB from 19 June 2020 when some business activities were permitted to resume, including opening of F&amp;B businesses to serve dine-in customers. With all of Japan Foods Holding’s restaurants resuming operations albeit with capacity limits, the Group was able to bounce back strongly in the second half of FY2021 to achieve a modest 0.5% YoY gain in revenue. Furthermore, Japan Foods Holding was able to maintain their strong and stable gross profit margin at 84.7% in FY2021, and increase from FY2020 with 84.4%, due to the Group’s tight cost control measures and efficient use of raw materials. Implementations Taken to Remain Competitive 
The share price of Koufu and Jumbo increased rather significantly in Period 1 with 25% and 53%, even when no dining in was allowed. This was testament to restaurant stocks’ resilience, including implementations such as expansions and rebranding efforts, were still carried out to mitigate negative impacts on business. Koufu expects to remain competitive with cautious growth and expansion plans. Where opportunities arise, the Group will look to capitalise on these opportunities with its strong cash position. The Group opened 2 new locations for R&amp;B Tea kiosks at Fusionopolis in January 2021 and Sun Plaza in April 2021 and at the same time closed 2 locations at The Kinex and SMU as part of our consolidation efforts to close down loss-making outlets so as to improve profit margins. In addition, the Group has also opened one new food court at Sun Plaza in April 2021 and have also further secured 3 new outlets at Marina Square, NTU and Outram Community Hospital to be opened in Q2 and Q3 2021. Apart from operating a coffee shop in our new Headquarter at the Integrated Facility in Q3 2021, the Group is also actively looking for new locations for the expansion of the retail brand, Dough Culture. Further to the opening of SingPost Centre in Q1 2021, Koufu has opened 2 new kiosks at Sun Plaza in March 2021 and Oasis Terrace in April 2021. In addition, the Group has also secured one new location for Grove quick-service restaurant to be opened at Northshore Plaza in Q4 2021. The Group currently still has a strong balance sheet and pledges to remain vigilant and explore strategies to support and reinforce its relationships with stakeholders. 
Likewise, Jumbo also opened 2 new outlets in May 2021 – a new Tsui Wah outlet located at JEM and their third Kok Kee Wanton Noodle stall at MBS. Furthermore, they rebranded their retail portfolio arm with the launch of Singapore’s multi-dining concept food and beverage – Love, Afare. YoY revenue for PRC improved by 66.9%. Including Taiwan, revenue outside Singapore amounted to $19.1 million for 1H FY2021, an increase of 53.9% from 1H FY2020. This helped to partially offset the decrease in revenue from Singapore, resulting in an overall decline in the Group’s revenue by 31.9% or $21.3 million to $45.4 million in 1H FY2021. Government Grants and Subsidies 
Although ABR Holdings experienced negative growth in last done price in Periods 1,2, and 3, the positive change of 4% in last done price in Period 4 indicated possible recovery. In addition, the Group generated a healthy net cash from operating activities of $26.3 million in FY 2020. The cash and cash equivalents of the Group increased by $7.1 million, ending the period with cash and cash equivalents of $52.9 million. 
Other income for FY 2020 comprised mainly government grants, such as the wage subsidy from the Jobs Support Scheme (JSS), property tax rebate and rental relief from the COVID-19 budget supplementary packages; as well as rent concessions granted by the landlords. These support measures from the government and rental relief from landlords have significantly cushioned the adverse impact from the slowdown of ABR Holdings’ business. Easing of Dine-in Restrictions from 2 people to 5 people on 12 July 2021 
With the easing of dine-in restrictions from 2 people to 5 people on 12 July 2012, opportunities remain for restaurant stocks as restrictions make it easier for revenue growth despite possible challenges for further lockdowns. Companies proved able to tide through the challenges posed by the COVID-19 situation, and even hinging on opportunities to increase the resilience of their company against external factors. With the COVID-19 situation evolving from a pandemic to an endemic, shifting our current lifestyle as the new normal, companies have acknowledged the need to gradually alter their business model and identify fresh competitive edges.    
Source: Bloomberg, SGX, Company announcements</body></html>





Kimly, Koufu, Jumbo, ABR Holdings, and Japan Foods Holding are the 5 biggest SGX-listed Restaurant stocks by market capitalisation, with a total capitalisation of over S$1.2 billion. Stocks that focused on dine in restaurant operations remained resilient amidst the evolving rules and regulations during the COVID-19 pandemic.   
	 
	
There have been four main periods that illustrated the change in dine-in rules and regulations ever since the start of circuit breaker last year, alternating between dining-in allowed and disallowed. Most restaurants admitted that these restrictions have hindered their operations and hence negatively impacted businesses. 
	 
	Kimly reported that the Group’s revenue rose by 14.2% with approximately S$15.3 million from S$107.4 million in 1HFY20 to S$122.6 million in 1HFY21. Kimly attributes their strong growth to revenue contribution from the Food Retail Division, Outlet Investment Business Division, and the Outlet Management Division

 

Restaurant stocks remained resilient   
Stocks that focused on dine in restaurant operations remained resilient amidst the constantly evolving rules and regulations that posed threats to the F&amp;B industry. Kimly, Koufu, Jumbo, ABR Holdings, and Japan Foods Holding were among the top 5 in this sector based on market capitalisation, with a total capitalisation of over S$1.2 billion. 



      
    
    Market Capitalization of Top 5 Restaurants stocks

Timeline of Singapore Government’s COVID-19 Dine-in Rules  
There have been 4 main periods that illustrated the change in dine-in rules and regulations ever since the start of circuit breaker last year, alternating between dining-in allowed and disallowed. Most restaurants admitted that these restrictions have hindered their operations and hence negatively impacted businesses. However, this did not stop them from innovating and evolving their business strategy to tide through the pandemic. With the support of government grants and subsidies, restaurant stocks remained resilient, with some even experiencing significant growth in their revenue.


      
    
    Period 1 - 4

Strong Performance with Growing Revenue  
Kimly reported that the Group’s revenue rose by 14.2% with approximately S$15.3 million from S$107.4 million in 1H FY2020 to S$122.6 million in 1H FY2021. Kimly attributes their strong growth to revenue contribution from the Food Retail Division, Outlet Investment Business Division, and the Outlet Management Division. In addition, the Group’s change in last done price indicated continuous growth with 16%, 48%, 12%, and 5% in Periods 1,2,3, and 4, respectively.  By altering their business strategies, the Group successfully hinged on opportunities presented by the ongoing pandemic.  Revenue contribution from the Food Retail Division increased by S$9.5 million from S$50.4 million in 1H FY2020 to S$59.9 million in 1H FY2021 due to various factors including the increase in food delivery sales by S$3.7 million. The strategic locations of the Group's food outlets in the HDB heartlands that span across Singapore, provides the Group with a competitive advantage to serve an increased footfall arising from the people working from home and dining-in at the F&amp;B establishments which have been allowed since 19 June 2020 with the lifting of COVID-19 restrictions. Revenue contribution from the Outlet Investment Business Division increased by S$3.0 million from S$0.7 million in 1H FY2020 to S$3.7 million in 1H FY2021. This was mainly contributed by the sale of beverages and tobacco products, rental income and provision of cleaning and utilities services from food outlet properties acquired in 2H FY2020. Revenue contribution from the Outlet Management Division increased by S$2.7 million from S$56.3 million in 1H FY2020 to S$59.0 million in 1H FY2021 due to revenue contribution of new and existing coffee shops. In addition, Kimly also announced entry into a joint venture agreement to operate and manage short-term HDB coffee shop lease and 2 acquisitions – 60% of the shares in Klovex Holdings and 75% of the stake in Tenderfresh business.  
Continuous Growth  
Japan Foods Holding was the next most defensive stock after Kimly of the five stocks with price gains of 29.5% across the four main periods. The Group’s revenue started to pick up when Singapore moved into Phase 2 of the CB from 19 June 2020 when some business activities were permitted to resume, including opening of F&amp;B businesses to serve dine-in customers. With all of Japan Foods Holding’s restaurants resuming operations albeit with capacity limits, the Group was able to bounce back strongly in the second half of FY2021 to achieve a modest 0.5% YoY gain in revenue. Furthermore, Japan Foods Holding was able to maintain their strong and stable gross profit margin at 84.7% in FY2021, and increase from FY2020 with 84.4%, due to the Group’s tight cost control measures and efficient use of raw materials.  Implementations Taken to Remain Competitive  
The share price of Koufu and Jumbo increased rather significantly in Period 1 with 25% and 53%, even when no dining in was allowed. This was testament to restaurant stocks’ resilience, including implementations such as expansions and rebranding efforts, were still carried out to mitigate negative impacts on business.  Koufu expects to remain competitive with cautious growth and expansion plans. Where opportunities arise, the Group will look to capitalise on these opportunities with its strong cash position. The Group opened 2 new locations for R&amp;B Tea kiosks at Fusionopolis in January 2021 and Sun Plaza in April 2021 and at the same time closed 2 locations at The Kinex and SMU as part of our consolidation efforts to close down loss-making outlets so as to improve profit margins. In addition, the Group has also opened one new food court at Sun Plaza in April 2021 and have also further secured 3 new outlets at Marina Square, NTU and Outram Community Hospital to be opened in Q2 and Q3 2021. Apart from operating a coffee shop in our new Headquarter at the Integrated Facility in Q3 2021, the Group is also actively looking for new locations for the expansion of the retail brand, Dough Culture. Further to the opening of SingPost Centre in Q1 2021, Koufu has opened 2 new kiosks at Sun Plaza in March 2021 and Oasis Terrace in April 2021. In addition, the Group has also secured one new location for Grove quick-service restaurant to be opened at Northshore Plaza in Q4 2021. The Group currently still has a strong balance sheet and pledges to remain vigilant and explore strategies to support and reinforce its relationships with stakeholders.  
Likewise, Jumbo also opened 2 new outlets in May 2021 – a new Tsui Wah outlet located at JEM and their third Kok Kee Wanton Noodle stall at MBS. Furthermore, they rebranded their retail portfolio arm with the launch of Singapore’s multi-dining concept food and beverage – Love, Afare. YoY revenue for PRC improved by 66.9%. Including Taiwan, revenue outside Singapore amounted to $19.1 million for 1H FY2021, an increase of 53.9% from 1H FY2020. This helped to partially offset the decrease in revenue from Singapore, resulting in an overall decline in the Group’s revenue by 31.9% or $21.3 million to $45.4 million in 1H FY2021.  Government Grants and Subsidies  
Although ABR Holdings experienced negative growth in last done price in Periods 1,2, and 3, the positive change of 4% in last done price in Period 4 indicated possible recovery. In addition, the Group generated a healthy net cash from operating activities of $26.3 million in FY 2020. The cash and cash equivalents of the Group increased by $7.1 million, ending the period with cash and cash equivalents of $52.9 million.  
Other income for FY 2020 comprised mainly government grants, such as the wage subsidy from the Jobs Support Scheme (JSS), property tax rebate and rental relief from the COVID-19 budget supplementary packages; as well as rent concessions granted by the landlords. These support measures from the government and rental relief from landlords have significantly cushioned the adverse impact from the slowdown of ABR Holdings’ business.  Easing of Dine-in Restrictions from 2 people to 5 people on 12 July 2021  
With the easing of dine-in restrictions from 2 people to 5 people on 12 July 2012, opportunities remain for restaurant stocks as restrictions make it easier for revenue growth despite possible challenges for further lockdowns. Companies proved able to tide through the challenges posed by the COVID-19 situation, and even hinging on opportunities to increase the resilience of their company against external factors. With the COVID-19 situation evolving from a pandemic to an endemic, shifting our current lifestyle as the new normal, companies have acknowledged the need to gradually alter their business model and identify fresh competitive edges.     
Source: Bloomberg, SGX, Company announcements


Restaurant Stocks Remained Resilient Amidst Singapore’s Dine-in Policies

Hong Kong

Tsui Wah Holdings Limited owns and operates a restaurant chain with restaurants in Hong Kong, China and Macau.

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Tsui Wah Holdings (1314 HK)

Restaurant Stocks Remained Resilient Amidst Singapore’s Dine-in Policies

Kimly, Koufu, Jumbo, ABR Holdings, and Japan Foods Holding are the 5 biggest SGX-listed Restaurant stocks by market capitalisation, with a...

Singapore Exchange Ltd (SGX)

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