Neo Group

Neo Group: Unrated note by UOB Kay Hian. House note that grp is a market leader in a growing industry. The event catering market in SG grew at a solid 3-year CAGR of 11.3% from $250m in 2009 to $306.6m in 2011. Based on sales in 2011, NGL is the largest event caterer in SG with a market share of 9%. Contrary to other segments of the F&B industry, economies of scale are especially vital in the food catering sector as all the food are prepared in a central kitchen. See further room for growth by NGL as we believe its significant market share as it allows it to achieve economies of scale, and further benefit through quality and competitive pricing. NGL plans to distribute at least 60% of its net profit as dividends annually for the next three yrs. For FY13, NGL announced a dividend of 1.5c (or a 71.4% payout), translating to a dividend yield of 4.5%. Major shareholders with more than a combined 80% stake have also pledged to maintain 100%, 70% and 40% of their shareholdings in the first, second and third year of listing respectively. Technically, the stock has been trading sideways within $0.285-0.345 post IPO. A break above $0.345 may see the stock test $0.395.