Old Chang Kee disappoints; adding Memtech in anticipation of earnings growth this year

(June 2): Over the past week, the benchmark Straits Times Index slipped 0.6% to close at 3,204.8 points. Our Singapore Market Portfolio lost 0.3% of its value for the period of May 23 to 30. Five of the 12 stocks in our portfolio saw gains; one ended the week flat, while six saw losses.

Among those that lost ground was home-grown snacks chain Old Chang Kee, which declined 3% for the period of May 23 to 30. On May 29, Old Chang Kee posted its results for FY2017 ended March. The company’s revenue climbed 6.1% to $78.3 million, thanks to revenue contributions from new outlets and higher sales from food delivery services. As at March 31, Old Chang Kee operated a total of 89 outlets in Singapore versus 83 outlets at the same time last year.

The increase in revenue is in line with our investment thesis. When we added the food stock to our portfolio on Feb 7, we had anticipated a ramp-up in manufacturing capacity to contribute to revenue. However, we were also expecting the additional sales to give Old Chang Kee better economies of scale and help it improve its margins.

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