Monday, January 27, 2014
Breadtalk Group: Maybank-KE initiates Coverage with a Buy Call and $1.40 TP, implying a 50% upside. The house postulates 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. Operational statistics are also healthy with EBITDA growing rapidly, which should allay fears on the group’s lacklustre profit growth, while Breadktalk’s higher margin businesses should also help lift earnings going forward. The house draws a prelude of a potential takeover offer by Thailand-based Minor International in the next 12-24 mths, who currently owns an 11% stake in Breadtalk. While the Thai hospitality and F&B group is noted for its history of acquisitions but reputation aside, its portfolio complements that of BreadTalk. Breadtalk’s TP is based on 7X FY14E EV/EBITDA, which is only half of its regional peers’ average, and coincidentally gels with Maybank-KE’s alternative SOTP valuation of the group. The house expects BreadTalk’s net profit to grow at 26% CAGR over the next three years as store expansion moderates slightly.