BreadkTalk

BreadkTalk continues its charge forward with the counter clocking a new all-time high today at $1.42, extending its two day rally to ~17%. As the only broker in the street who has a Buy call on BreadTalk, Maybank-KE had in recent weeks highlighted the hidden value of property stakes owned by the group that could be monetized in future. This follows the proposed acquisition of assets of Perennial Real Estate Holdings (PREH) by St James, through the issue of new shares at $0.7/share, in a reverse takeover deal valued at $1.56b. BreadTalk holds equity stakes in several real estate assets in partnership with PREH, worth an estimated $159m ($0.56 per share). Yet these stakes are recognized at cost of only $84m on its balance sheet. Going forward, BreadTalk also guides that China will continue being a key driver of its growth, as the company eyes further penetration of its bakery business in Tier 2 and 3 Chinese cities, where a large captive market beckons. Maybank-KE opines that BreadTalk is by far the most successful Singapore F&B company, boasting a solid regional presence for its homemade brands via more than 800 outlets across 15 countries, with plans to raise its store count to 1,000 in 2014. BreadTalk's operational statistics are healthy; and its rapid EBITDA expansion should allay fears about lacklustre profit growth and lift earnings going forward. The house expects BreadTalk’s net profit to grow at 26% CAGR over the next three years along with moderate new store expansion. According, to Maybank-KE’s sum-of-parts valuation on the counter, BreadTalk has an intrinsic value of $1.65, while the house rates the counter as a Buy with $1.54 TP, pegged to a conservative 7x EV/EBITDA.