Friday 31 December 2021

(December Results) How i would invest in the singapore stock market if i had 100k of spare money

 

December 2021 Returns: -1.20%
2021 Returns: 54.42%
Since Inception (9 Sept 2020) Returns: 63.79%


Changes Made (Please see below)


Removals

Hong Leong Finance - Too slow moving and not reactive to rate hikes

OTS Holdings - Results and FA Research did not seem to fit.

Yanlord Land - Precautionary rotation to prevent any further impact from China Property Saga that is likely to unravel in January and onwards as bond expires.

Additions

Q&M Dental - Covid Play, Trace, Test, Vaccinate Policy in Singapore. Q&M Dental with its recent approval via Acumen now can offer pcr testing up to 100 sites in Singapore hence testing will likely play a bigger part in top and bottom-line. My view is that covid is unlikely to go away as well in 2022.

TC Auto - Inflation play and a play on demand will increase when chip shortage is slowly alleviated. Valuation cheaper than Hkex listed peers.

Straco - As i picked a Covid Play, i decided to pick Straco as it is a domestic re-opening play and it has traded at a price below the lows of 2020 March. With 3Q 21 results coming in at 4 million profit. Assuming a 16 million profit, 74 million of net cash, market cap of 383 million currently, this implies a PE of 20. Not cheap, but i believe it is hard to base off the profits at this level as with covid it is hard to estimate a consistent PE. 

However, i believe that conditions should improve subsequently. In the event it does not, at least it would mean that Q&M would likely do well due to more testing. 

Overall target for the portfolio to return 20% in 2022.



Friday 17 December 2021

(Idea for 2022 Top Picks?) Tam Jai International (HKEX: 2217) Part 2 (Long Post)


Basic Info

Tam Jai International (HKEX 2217)

Trading Price: 3.12 HKD

Market Cap 4.18B HKD

Half Year Adjusted Earnings: 147 036 000

Implied Full Year PE: 14.2

Company Analysis

Year

Revenue

Outlets

Revenue per Outlet

2019

1,556,173,000

107

14,543,672

2020

1,691,179,000

125

13,529,432

2021

1,794,693,000

147

12,208,795

2022 1H

1,181,494,000

157

7,876,626


In terms of Revenue per Outlet, there has been decline in revenue per outlet since 2019. As the prospectus showed up till 2021 results, it is not surprising that most folks are not convinced with the company's ipo and it has opened underwater upon IPO.

However, following its release of its 2022 1H results, things seem to indicate a turnaround as the company has managed to achieved a revenue per outlet that would exceed 2019 if the half year result holds for the full year.

(Excellent 1H 2022 Results)

(Spending per customer in Hong Kong increased and Increased daily bowls per seat) 



Tam Jai has attributed the improved results to 3 factors

1) Smart Rostering - This is in the aspect of staff training and positioning such that a staff can go from frontline staff to different work stations such as kitchen, takeaway delivery arrangement and cashier to customer serving. As such, everyone can fill up the roles well and this means that there is no need for specific hires e.g a head chief or a manager in charge of waiters etc.

2) Integration of central kitchen and customizations of food choices on delivery platform - This has allowed for cost savings as food is centrally packed and delivered to the various restaurants. This means that the sourcing of food has better quality control. In terms of customizations, this allowed for premium toppings and promotions on delivery platforms that allowed for more average spending per customer and improve profit margin.

3) Increased brand awareness on social media as well as stable covid-19 situation in Hong Kong - This allowed for resumption of dine-in and in larger size which contributed to an increase in willingness to spend outside.

Tam Jai has also planned to grow around 160 outlets (double of their current amount by 2024)


(28 by March 2022, 66 by March 2023, 79 by March 2024)

This represents a potential growth driver. However, we have to beware of its ability to make new outlets profitable and the problem of potentially having too much outlets such that the attrition effect of each outlet occurs.

Management is led by Mr Lau Tat Man, Daren. 


He joined in May 2018 and prior to joining was at Café De Coral as the Managing Director of Quick Service Restaurant Group from March 2015 to April 2018. During his time this is the growth that has been seen in Café De Coral 

Year

Café De Coral Same Store Quick Service Restaurant Growth

2015/16

4%

2016/17

4%

2017/18

3%


After his departure the record is as such

Year

Café De Coral Same Store Quick Service Restaurant Growth

2018/19

Flat

2019/20

-6%

2020/21

-14%

In comparison, from the prospectus the growth of Tam Jai is seen as such

Year

Tam Jai International Same Store Growth

2019/20

+1.3%

2020/21

-9.4%

Of course Café De Coral had more restaurants compared to Tam Jai when doing a comparion of his time there vs at Tam Jai, but i believe he has definitely made a positive impact when he is at the company.

Major Shareholder

Tam Jai International's major shareholder would be Toridoll Holdings Corporation a company listed in Japan under the ticker 3397. It holds around 74.61% in the company. It is a company that operates restaurants and has different brands under its name. A notable one to singapore readers would be monster curry.

Interesting enough, the company is trading at an implied PE of 20 currently  and the company itself is unprofitable from April 2020 to September 2020 while Tam Jai is profitable.

(As seen here profits is negative in 2020 but Tam Jai International is not the reason why it is unprofitable)

Peer Analysis (PE Ratio)

Company Name

Ticker

PE

Tam Jai International

2217

14.2

Fairwood Holdings

52

19.7

Tang Palace

1181

9.8

Café de Coral

341

49.07

Tao Heung

573

Negative as Coy is loss making

Tsui Wah

1314

Negative as Coy is loss making

Ajisen (China)

538

10.25

In terms of PE, Tam Jai International is neither the highest PE nor the lowest PE. However, i will re-address this again below after looking at various analysis below.

Peer Analysis (Revenue and Restaurant)

Company Name

Revenue

Number of Restaurants

Number of Staff

Tam Jai International

1,181,494,000

157

3045

Fairwood Holdings

1,497,207,000

172

5700

Tang Palace

873,657,429

52

3800

Café de Coral

3,823,746,000

482

18443

Tao Heung

1,301,377,000

115

5512

Tsui Wah

522,486,000

83

2600

Ajisen (China)

1,238,209,261

707

9451

Company Name

Revenue per Restaurant

Revenue per Staff

Staff per Restaurant

Tam Jai International

7,525,439

388,011

19

Fairwood Holdings

8,704,692

262,668

33

Tang Palace

16,801,104

229,910

73

Café de Coral

7,933,083

207,328

38

Tao Heung

11,316,322

236,099

48

Tsui Wah

6,295,012

200,956

31

Ajisen (China)

1,751,357

131,014

13


In terms of revenue per restaurant, Tam Jai has finished middle of the pack. Nothing surprising nor alarming. However, it has impressed by revenue per staff as it has low amount of staff yet it has churn out a good revenue per staff. This amount is actually around 40% better then the 2nd place Fairwood Holdings.

This is in-line with the smart rostering that was mentioned earlier. As such, the restaurant is run efficiently.

Peer Analysis (Cost of Staff)

Company Name

Employee Expense

Number of Staff

Cost per Staff

Tam Jai International

358,546,000

3045

117,749

Fairwood Holdings

500,462,000

5700

87,800

Tang Palace

276,641,745

3800

72,800

Café de Coral

1,240,002,000

18443

67,234

Tao Heung

383,943,000

5512

69,655

Tsui Wah

168,814,000

2600

64,928

Ajisen (China)

324,256,740

9451

34,309


Peer Analysis (Cost of Restaurant)

Company Name

Employee Expense

Number of Restaurant

Staff Cost per Restaurant

Tam Jai International

358,546,000

157

2,283,732

Fairwood Holdings

500,462,000

172

2,909,663

Tang Palace

276,641,745

52

5,320,034

Café de Coral

1,240,002,000

482

2,572,618

Tao Heung

383,943,000

115

3,338,635

Tsui Wah

168,814,000

83

2,033,904

Ajisen (China)

324,256,740

707

458,638


While the efficiency is in the staff, they have also paid their staff well. This is an initial worry but after looking at how much each staff cost per restaurant is, i am convinced that they are not overspending. In fact human capital is an important part of Food and Beverage Operation.

In this peer analysis, i feel that Fairwood Holdings and Café de Coral are its closest competitors. Both have over 100 restaurantss and both are big names in Hong Kong. 

As for Tao Heung and Tsui Wah, its poor profitability means that it might not be a good comparison.

Peer Analysis (Restaurant and Staff)

Company Name

Profit per Restaurant

Profit per Staff

Tam Jai International

5,241,707

270,262

Fairwood Holdings

5,795,029

174,868

Tang Palace

11,481,070

157,110

Café de Coral

5,360,465

140,094

Tao Heung

7,977,687

166,444

Tsui Wah

4,261,108

136,028

Ajisen (China)

1,292,719

96,705


After using revenue to minus cost, we can observe that Tam Jai International has done well in generating profit per staff. It has managed to beat companies that has the least staff cost per restaurant (Ajisen), as well as Tang Palace (highest revenue per restaurant).

When compared to the heavyweights of Hong Kong, Fairwood Holdings and Cafe de Coral, Tam Jai International is not the best in generating revenue per restaurant, neither it is the one that pays the staff the least. It does not have the most restaurants either. However, with the lean staff operations, they turned out to be able to generate best profitabiltiy in the form of profit per staff.

Conclusion

Based on current data, Tam Jai has proven that it should deserve a better PE if it executes its growth strategy well and keeps its profit per staff at its current level or a better level. 

Its ability to stay profitable in 2020 even without government grant is laudable. Tam Jai International recorded a adjusted profit margin of 8.6% in 6 Months 2020 (April 2020 to Sept 2020)

This is not seen in Café de Coral, Tao Heung, Tsui Wah, Ajisen and Tang Palace who are all unprofitable in 2020.

For Fairwood Holdings. It is profitable but without the government subsidies it would not be profitable.

The current PE is as such because i believe the market has doubts over their shop opening strategy as well as doubts that it is able to generate future organic growth. After all organic growth has been lacklustre prior to this result release and the 20% comparable restaurant growth that was achieved this year might not be able to be repeated and carried forward to new openings.

The company has been very active on its facebook page in Hong Kong and Singapore as well. In this aspect i believe that it has done very well in attempting to generate more

(Tam Jai Singapore being seen posted on IG as well by foodies)


With cash from IPO, I believe the company is in a position to open more outlets and i feel like it could be a gamble that works out in 2022. The company has indicated in its prospectus presentation slides that it takes 1-5 months for an outlet to break even. 
Hence if the target of 28 more outlets is achieved this financial year (roughly 18% increase in outlets), these should translate to the bottom line latest by 2H FY 2022 (Oct 2022 to March 2023).  A key result release to check on its execution of its expansion strategy.

The key indicators that will give the company a better valuation will be

1) Continued/Sustained Organic Growth in Same Store operations
2) Further cost savings in its lean restaurant operations
3) Good growth and profitability in new outlets as well as overseas expansion
4) Increased brand awareness and transition to increased visits to the restaurants.

The following factors could result in the company spiraling downwards

1) Newly opened outlets erode current stores profitability
2) Expansion take longer to break-even or fail to achieve break-even levels and result in losses
3) Scandals related to food quality happening to the company (although this applies throughout the F&B Industry)
4) Increased central kitchen cost from opening outlets affecting short-term profitability when expansion is too fast

For myself, i would definitely put this stock on the watchlist. The reasons that this stock is not in my portfolio at the time of writing is because of poor market conditions have led to other stocks in the portfolio getting to a low level that i think is somewhat attractive to average and Tam Jai International is currently trading back up above its IPO Price.

Another personal reason would be the number of stocks owned and the stocks to cash proportion which all in all is part of my portfolio planning that i have to deal with myself.

I do like the company.

However, I will not be giving an estimation price target because i believe that this price target will change upon various results release and updates on the company which is why it will never be accurate.