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BreadTalk brings F&B delights from all around the world

Samantha Chiew
Samantha Chiew • 3 min read
BreadTalk brings F&B delights from all around the world
SINGAPORE (June 25): BreadTalk Group has several business expansion plans coming up, which has caught the attention of CGS-CIMB Securities.
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SINGAPORE (June 25): BreadTalk Group has several business expansion plans coming up, which has caught the attention of CGS-CIMB Securities.

Earlier in May, the group entered into a joint venture (JV) with Shenzhen Pindao to bring tea beverages brands Nayuki and Tai Gai to Singapore and Thailand, with a right of first refusal to operate in Malaysia, Indonesia and the Philippines.


See: BreadTalk in JV to bring new tea beverages and cafes to Singapore and Thailand

Singapore will be the first overseas market, with the first Tai Gai store in the country slated for launch in 4Q18, adding to more than 100 stores that sell Nayuki and/or Tai Gai in China.

BreakTalk’s wholly-owned subsidiary, Together Inc, will hold 90% of this JV.

In an unrated report, analyst Colin Tan also likes the group for its partnership with Wu Pao Chin Food to expand the Taiwanese Wu Pao Chun Bakery’s regional footprint under a master franchise agreement.

Meanwhile, other cities targeted for expansion include Beijing, Shenzhen, Guangzhou, Singapore and Hong Kong.

The chain’s first JV territory for expansion will be Shanghai, where the group will have an 80% indirect stake in it through its wholly-owned subsidiary, Shanghai Star Food F&B.


See: BreadTalk partners Wu Pao Chun Bakery to expand into 4 major China cities

In addition, the group’s Together Inc entered into a $3 million JV in Dec 2017 with Japan’s Shinmei Corp to oversee the supply of ingredients – flour, rice, sugar, dairy, seafood and product packaging – to support its F&B operations globally.

The group holds 66% in this JV and expects cost savings and new revenue streams to come from selling these ingredients.


See: BreadTalk in JV with century-old Japanese food trader and supplier

Moreover, the group’s bakery division accounted for 23% of its 1Q18 EBITDA of $16.3 million, although total EBITDA dropped 31% y-o-y as the group closed several of its franchise outlets in China.


See: BreadTalk's 1Q earnings fall 89.1% to $1.2 mil on absence of one-off gain

“Nonetheless, management is optimistic that the situation will turn around due to the continued expansion of its franchise outlets in other territories,” says Tan.

The group is also planning to set foot into the Japanese market with its first BreadTalk outlet to open in the country in FY18m, according to the group’s chairman in a media statement on Dec 22, 2017.

BreadTalk also manages the popular Taiwanese restaurant brand Din Tai Fung, which has been the key earnings contributor to its restaurant division and accounted for 53% of the group’s 1Q18 EBITDA.

Since end-1Q17, the group has added one more outlet in Singapore and two more in Thailand, while targeting to open Din Tai Fung’s first European outlet in London by 4Q18.

Based on Bloomberg consensus estimates, the stock is currently trading at 30.9 times FY18 earnings and 4.0 times FY18 book value with a dividend yield of 2.0%.

As at 12.20pm, shares in BreadTalk are trading 1 cent lower at $1.02.

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