BreadTalk

BreadTalk: Maybank KE touts BreadTalk as the most successful Singapore-based F&B company, with an enviable footprint. BreadTalk now boasts 800 outlets across 15 countries, with an ambitious target to take this number to 1,000 in 2014. Maybank KE also likes BreadTalk’s China presence, with more than 300 outlets in 48 cities. The house underscores how the regional footprint is secured via internally created brands, typically unique concepts, which allows for firmer control over its own branding. Minor International (MINT), a Thai-based F&B company has chalked up an 11% stake in BreadTalk since Aug 2013. Maybank KE reckons this may be a prelude to a bigger corporate action (e.g. M&A/ privatization), given MINT’s history of acquisitions. Even if no corporate action takes place, Maybank KE highlights a working alliance is possible, given their complementary business portfolios. The house acknowledges BreadTalk’s bottom-line growing at a dismal pace relative to its operational development, but largely attributes it as accounting for expansion, and does not truly reflect its cash generation ability. Maybank KE maintains a Buy call on BreadTalk with a TP of $1.40 based on a 7x FY14e EV/EBITDA, half of the regional average. Cross-checking the replacement value of the firm (excluding assets like brands, and various real estate stakes) also yields the same valuation.