BreadTalk

BreadTalk: China will be a key driver of growth going forward, as the company eyes further penetration of its bakery business in Tier 2 and 3 cities, where a large captive market beckons. Last year, it opened a record of 9 food courts in China, and the pace is expected to continue. Maybank KE reckons as Din Tai Fung thrives in Singapore and Thailand, to secure master franchises in new markets isn’t impossible. Despite rising labour costs, Singapore remains a cash cow with healthy margins. The house expects overall margin improvements would come from higher scale, especially in other geographies, as well as the increase in franchisee revenue. The stock is currently trading at a forward P/E of 18.3x. Maybank KE reckons the stock is still significantly undervalued, and maintains Buy with a conservative TP of $1.50