SINGAPORE (June 25): CGS-CIMB Securities says Japanese food specialist enterprise RE&S Holdings is likely to see its earnings hit by major enhancement works at Great World City, but notes that the counter is currently trading below its Singapore restaurant operator peers.
“RE&s stated the earnings from its six outlets in the mall may be negatively affected by the refurbishment,” says analyst Colin Tan in an unrated report on Friday.
RE&S operates a total of 39 full-service restaurants in Singapore and Malaysia, with some two-thirds of these comprising popular casual dining brands Ichiban Boshi and Ichiban Sushi. The group also owns 38 quick-service restaurants, food kiosks, bakeries and retail outlets.
According to Tan, the impact from the Great World City refurbishment will be cushioned by the opening of its new Ichiban Sushi outlet in Singapore in February. The group also plans to add two more outlets by the end of this year.
Its full-service restaurant portfolio contributed to 74.4% of group revenue in FY17, while revenue from its quick-service segment rose to 25.6% of group revenue.
“Management sees greater growth potential for the quick-service segment amid labour crunch issues plaguing the local F&B sector,” says Tan.
Meanwhile, following a visit to RE&S’s central kitchen organised by the group, the analyst adds that he was “impressed” by the level of automation deployed and the strict quality control measures implemented.
“The stock is currently trading at 12.4x FY17 P/E, below 21.5x historical average of its Singapore restaurant operator peers,” says Tan. RE&S, which was listed on SGX in November last year, is also trading below its IPO price of 22 cents.
As at 3.26pm, shares of RE&S are trading flat at 19.5 cents.
