Investors should be worried if companies are stagnant in terms of their business plans in a highly competitive industry such as F&B, as companies that lag in terms of adapting to market needs will erode the value of the business.
Soup Holdings is a long-standing name in the domestic F&B industry. The company was incorporated in 1991 and listed on the Singapore Exchange (SGX:S68
) (SGX) mainboard in December 2009. Currently, Soup Holdings (SGX:5KI) trades at 7.8 cents with a market cap of $21.8 million. Given its relatively small size, along with low investor participation in the stock in terms of trading volume, we think Soup Holdings is undervalued, particularly from a financial and quantitative standpoint.
Based on its latest 1HFY2023 ended June results, more than 80% of its revenue and 90% of its profits are derived from restaurants operated under brands such as Soup Restaurant, Teahouse, Cafe O, Pot Luck and Little Teahouse. The second segment is food processing and distribution of its own brand of ginger sauce via supermarkets and other retail channels although this means the company is overly reliant on ginger, where its harvest is subject to the vagaries of nature. However, the company has clearly stated that its businesses are not affected significantly by seasonal or cyclical factors. In other words, the business risk is not concentrated and supports the case to invest in the company.
