Singapore Company Guide

Breadtalk Group Ltd

Version 2 | Bloomberg: BREAD SP | Reuters: BRET.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 9 Jun 2017

BUY CHIJMES/AXA could be sold

Last Traded Price ( 8 Jun 2017): S$1.65 (STI : 3,237.05)
Price Target 12-mth: S$1.92 (17% upside) (Prev S$1.69) Maintain BUY and S$1.92 TP. We reiterate BUY on BreadTalk as
Analyst we believe its earnings will continue to turn around and deliver
Alfie YEO +65 6682 3717 alfieyeo@dbs.com growth. 1Q17 earnings have validated that its Foodcourt business
Andy SIM CFA +65 6682 3718 andysim@dbs.com is on track for a turnaround. Apart from earnings growth, we see
potential catalysts from the possible sale of AXA Tower/CHIJMES
What’s New and revaluation of Beijing Tongzhou Development. BreadTalk’s
 Perennial shortlisted as a buyer for United valuation, based on its core business (ex-property investments), is
Engineers may spark its need to raise funds compelling at 16.2x FY17/18F PE.

 BreadTalk has tag along rights if Perennial sells Where we differ. We believe consensus has yet to factor in
CHIJMES or AXA Tower BreadTalk’s investment properties into its share price. BreadTalk’s
core business is undervalued at 16.2x FY17/18F PE after stripping
 Potential for special dividends if CHIJMES or/and
out the value of investment properties from the current share
AXA Tower is/are sold
price. Applying a 22x PE valuation to the retail business and
 Maintain BUY, TP raised to S$1.92 adding back the value of its investment properties, we have
derived a target price of S$1.92, which is above consensus.

Potential catalyst. We see potential for more special dividends if

Price Relative
S$ Relative Index Perennial’s need to raise funds leads to the sale of AXA Tower or
CHIJMES. BreadTalk has tag along rights and has monetised along
1.8 222
1.7
202
1.6
1.5
1.4
182

162
with Perennial for 111 Somerset and 112 Katong before. The
1.3
1.2 142 revaluation of Beijing Tongzhou Development will also be another
share price catalyst.
1.1 122
1.0
102
0.9
0.8 82
Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

Breadtalk Group Ltd (LHS) Relative STI (RHS) Valuation:

Our TP of S$1.92 is derived from a sum-of-parts (SOTP) valuation.
Forecasts and Valuation On a per share basis, we value its retail business at 22x blended
FY Dec (S$ m) 2016A 2017F 2018F 2019F FY17/18F PE at S$1.58, investment properties at S$0.42 based on
Revenue 615 643 673 704 market value, net debt at -S$0.07 per share.
EBITDA 80.0 93.1 97.8 103
Pre-tax Profit 29.7 47.9 41.4 44.7
Key Risks to Our View:
Net Profit 11.4 27.1 23.2 25.1
Net Pft (Pre Ex.) 8.63 17.2 23.2 25.1 Operational risks include food safety and licences as well as
Net Pft Gth (Pre-ex) (%) (29.2) 98.9 35.2 8.0 negative publicity. In extreme cases, food operating licences can
EPS (S cts) 4.07 9.64 8.25 8.91 be revoked for lapse in food safety. Negative publicity may also
EPS Pre Ex. (S cts) 3.07 6.10 8.25 8.91 result in weaker demand and poorer marketability when selling its
EPS Gth Pre Ex (%) (29) 99 35 8 franchises as the public and franchisees shy away from their
Diluted EPS (S cts) 4.05 9.60 8.21 8.87
Net DPS (S cts) 3.85 4.50 2.50 2.50
association with BreadTalk.
BV Per Share (S cts) 46.9 52.1 57.8 64.2
At A Glance
PE (X) 40.6 17.1 20.0 18.5
PE Pre Ex. (X) 53.8 27.0 20.0 18.5 Issued Capital (m shrs) 281
P/Cash Flow (X) 5.2 5.3 5.5 5.2 Mkt. Cap (S$m/US$m) 464 / 336
EV/EBITDA (X) 6.6 5.4 4.8 4.3 Major Shareholders (%)
Net Div Yield (%) 2.3 2.7 1.5 1.5 Meng Tong Quek 34.0
P/Book Value (X) 3.5 3.2 2.9 2.6 Lih Leng Lee 18.6
Net Debt/Equity (X) 0.3 0.0 CASH CASH
Primacy Investment 14.0
ROAE (%) 8.8 19.5 15.0 14.6
Free Float (%)
Earnings Rev (%): 0 0 N/A 3m Avg. Daily Val (US$m) 0.34
Consensus EPS (S cts): 6.90 7.90 9.50
Other Broker Recs: B: 3 S: 0 H: 1 ICB Industry : Consumer Services / Food & Drug Retailers

Source of all data on this page: Company, DBS Bank, Bloomberg

Finance L.P

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ed: CK / sa:JC, PY
Company Guide
Breadtalk Group Ltd

WHAT’S NEW

BreadTalk could benefit if Perennial sells CHIJMES or AXA Tower

Perennial shortlisted for potential United Engineers Value of CHIJMES

divestment. Bloomberg reported on 31 May that United CHIJMES Note
Engineers has picked Perennial over KKR & Co. and SingHaiyi, Stake 29% 1
for final talks for a potential divestment. OCBC, Great Eastern Purchase price 100% S$177m 2
and the Lee family which founded OCBC Bank own more Purchase price 29% S$51m 3=1x2
than 30% of United Engineers. Purchase year 2012
Valuation S$334m 4
Perennial may need to raise funds to pursue United Effective value S$97m 5=1x4
Engineers. As at 1Q17, United Engineers’ NAV stood at Book (revalued) S$23m 6
S$3.06 per share. Our property desk evaluates that at the
Bonds (cost) S$18m 7
average historical transactions of 1x P/NAV, a takeover of
Total investment (book) S$41m 8=6+7
United Engineers would cost S$1.9bn and funding will the
Estimated bank debt S$33m 9=3-7
key question for Perennial. It could potentially 1) raise funds
LTV 58% 9/3
via borrowings; 2) divest its assets to fund the acquisition; or
Equity value S$64m 5-9
3) form a consortium of like-minded capital partners if the
Source: Company, Perennial, DBS Bank estimates
deal were to proceed. Two of its properties which it could
potentially divest are AXA Tower and CHIJMES, which
Value of AXA Tower
BreadTalk has a stake in.
AXA Tower Note
BreadTalk has a history of selling along with Perennial and Stake 5.31% 1
has paid special dividends to shareholders. BreadTalk is a joint Purchase price 100% S$1.17b 2
investor along with Perennial in AXA Tower and CHIJMES Purchase price 5.31% S$62m 3=1x2
where it has tag along rights if Perennial chooses to sell. In Purchase year 2015
the previous sales of 112 Katong and 111 Somerset, it has Valuation S$1.25b 4
“tagged along” with Perennial to sell off its stake in these Effective value S$66.4m 5=1x4
two properties. These have resulted in special dividends paid Book S$11m (cost) 6
to shareholders. Bonds S$8.5 7
Total investment S$19.5m 8=6+7
What is the remaining value of the Singapore properties? Estimated bank debt S$42.5m 9=3-8
BreadTalk still has 5.31% of AXA Tower and 29% stake LTV 69% 9/3
CHIJMES in Singapore. These properties’ market values are Equity value S$24m 5-9
effectively worth S$66m and S$97m to BreadTalk, taking in
Source: Company, Perennial, DBS Bank estimates
account both debt and equity value. The debt component of
Note: Cumulative strata sales in AXA Tower to date is small at
these two properties’ investment is undisclosed. However, we
S$41m, the start in 2016.
estimate them to be between c.60% and 70%. Equity values
in both these properties are S$24m and S$64m, respectively,
Potential for special dividends. BreadTalk has proven that it
based on our estimated debt proportion taken out against
has on both occasions of selling its stake in 112 Katong and
the purchase of the respective properties. The current market
111 Somerset paid special dividends. In 1Q16 it sold 112
value of CHIJMES and AXA Tower based on latest valuation
Katong for a net gain of SS$8.5m and it paid out 1.35 Scts of
reports are S$334m and S$1.25bn respectively.
special dividends equivalent to S$0.03 per share. In 1Q17,
BreadTalk also paid out 3.3 Scts per share of special dividends
in 1Q17 when it sold 111 Somerset for a net gain of
SS$9.3m. If Perennial chooses to raise funds via asset sale, it
could potentially sell AXA Tower or CHIJMES, both of which
could see BreadTalk selling out as well, effectively benefiting
shareholders with possible special dividends.

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 Company Guide
Breadtalk Group Ltd

Investment properties sold Positive on the core business and the stock
112 Katong 111 Somerset
Sold 1Q16 1Q17 Core business is turning around. We previously held the view
Cost S$7.5m S$17.2m that BreadTalk’s core earnings would turn around, led by
Selling price S$16m S$26.5m better operating efficiencies from its three divisions. In
Gain S$8.5m S$9.3m particular, the Foodcourt business is expected to turn
Gain per share 3 Scts 3.3 Scts profitable compared to losses it incurred last year. Growth
Special dividend paid/share 1.35 Scts 2 Scts will therefore be led by cost efficiencies rather than sales
growth. Its 1Q17 results clearly validate our view. Going
Sp dvd per sh/gain per sh 45% 60%
forward, we expect to see continued core profit improvement
Source: Company, DBS Bank estimates
led by a more convincing turnaround of its Foodcourt
business.
Estimate at 4.3 Scts and 0.8 Scts in special dividends from
CHIJMES and AXA Tower if BreadTalk sells at current
More upside for Beijing Tongzhou in the longer term. Beijing
valuation. Based on 112 Katong and 111 Somerset, we
Tongzhou development is currently under development
estimate that BreadTalk historically paid out 45-60% of its
(Phases 1 and 2) and booked at cost. It is a mixed use
gains as special dividends per property sale. Based on a 50%
development with retail, office and residential elements and
payout assumption, we estimate that CHIJMES and AXA
8.4m sqft of GFA. We see upside to the value of Beijing
Tower could pay 4.3 Scts and 0.8 Scts as special dividends,
Tongzhou once the development completes. The Tongzhou
respectively, at current property valuations. It could potentially
District is Beijing’s new Central Business District located in the
pay more if these properties are sold at above current
South East of Beijing, c.23 km from Beijing's city centre, c.16
valuations.
km from the Beijing Capital International Airport, and c.9 km
from the US$3.3bn Universal Studios Beijing, which will be
Simulation of special dividends per share
one of the largest theme parks in China. Construction and
CHIJMES AXA Twr
commencement of operation is expected to complete by
Cost 1 S$18m S$19.5m
2018.
Effective value 29% 2 S$97m S$66.4m
Less: Estimated debt 3 S$33m S$42.5m
Valuation
Net effective value 4=2-3 S$64m S$24m
Gain on property 5=4-1 S$46m S$4.5m Reiterate BUY, TP raised to S$1.92. We reiterate our BUY
Less: Revalued gain 6=4-5 S$22m n/a recommendation on BreadTalk as 1) earnings are turning
Net gain 7 S$24m S$4.5m around; 2) potential catalysts of special dividends from
Gain per share 7/281 8.5 Scts 1.6 Scts possible sale properties if Perennial sells these properties to
Sp dvd per sh/gain per sh assumption 50% 50% raise funds to buy United Engineers; and 3) longer-term share
Special dividend 4.3 Scts 0.8 Scts price catalyst from revaluation of Beijing Tongzhou
Source: Company, DBS Bank estimates Development. Its core business currently trades at a
compelling 16.8x FY18F earnings. Our TP of S$1.92, based on
sum-of-parts (SOTP) valuation, is derived from S$1.58 for its
retail business at 22x blended FY17/18F PE, S$0.42 for its
investment properties based on market value, and -S$0.07 for
its net debt.

Value of property investments on BreadTalk’s books (excluding 111 Somerset sold in 1Q17)
Securities (effective stake) Bonds Shares Cost Valuation Accounting classification
AXA Tower (5.31%) S$8.496m S$10.875m S$19.4m S$23m Investment securities at cost
CHIJMES (29%) S$18m S$22.643m S$18m S$41m Bonds as investment securities at cost,
Shares as associates revalued at market
Beijing Tongzhou Integrated Dev’t n/a S$34m S$34m S$34m Equity instruments (unquoted) at cost
Shanghai Luidi Investment property n/a S$23m S$23m S$23m Investment property revalued at market
Total S$94.4m S$121m
Source: Company, DBS Bank

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Company Guide
Breadtalk Group Ltd

Bakery outlets
CRITICAL DATA POINTS TO WATCH
862 862 867 872 877
885.8

Critical Factors 759.2

Less aggressive store expansion to concentrate on driving higher 632.7

operating efficiencies and margin improvement. The focus is to 506.2

make existing operations more efficient, lower operating costs 379.6

and expand margins. Store openings in the next few quarters 253.1

will therefore not be aggressive. We see margins improving at 126.5

the group level, driven by the swing to profitability at the 0.0
Foodcourt business, cost savings initiatives at the bakery, and 2015A 2016A 2017F 2018F 2019F

improved sales mix from the restaurant business. We expect Restaurant outlets
store expansion to be more aggressive once cost efficiencies
38.8 38
and margin improvements are realised in the next year or two. 34
36
32
31.0 30

Driving margin improvement through cost efficiencies. Initiatives

23.3
such as better demand planning, more efficient human resource
planning, tighter cost controls have helped to benefit operating 15.5

margins. They have led to lower food wastage, and reduction in

7.8
unnecessary payroll expenses. Management has also been
spending less on capex, leading to some moderation in 0.0
2015A 2016A 2017F 2018F 2019F
depreciation expenses going forward.
Food court outlets
Non-performing legacy franchisees. We expect to see a stronger 65
66.30
franchisee base with less drag from non-performing accounts 57
61 61 61

post restructuring of franchisee accounts. As franchise outlets 53.04

have higher net margins, and lower direct operational risk, there
39.78
is potential for Bakery margins to increase as well given that
franchise revenue is royalty income, recognised as a percentage 26.52

of franchisee sales with minimal costs to BreadTalk. We expect

13.26
margins to increase when a mix of franchise stores improve
going forward. 0.00
2015A 2016A 2017F 2018F 2019F

Changes to management personnel, tenant-mix and tenant Total

quality has enabled Foodcourt to turn profitable. Foodcourt 985.8 957 951 962 969 976

division is expected make a marked turnaround in FY17F. While

foodcourts in Singapore were profitable in FY16, Foodcourts in 788.6

tier 2 cities in China were a drag. Changes were made to the 591.5
China portfolio in FY16 by closing non-performing outlets
394.3
especially in tier 3 cities. It also replaced China Foodcourt’s
management team with new personnel which made changes to 197.2

tenant quality and tenant mix, which have led to improvement

0.0
in performance and occupancy at its China Foodcourts. Store
2015A 2016A 2017F 2018F 2019F
openings this year will include Shenzhen, Guangdong and
Shanghai. Annual sales per outlet S$m
0.72
0.7 0.69
0.67
New outlet in London this year. BreadTalk has already planned 0.65 0.65

for a new outlet in London this year through a JV (BreadTalk is 0.6

the major shareholder of the JV) with Fairy Rise Development 0.4
(Din Tai Fung franchise owner), Din Tai Fung Taiwan, a UK
partner and a Taiwanese individual. We also see scope for more 0.3

outlets in Thailand as there are currently only three Din Tai Fung 0.1
restaurants. As restaurant margins are attractive, better sales
mix from restaurant business would improve overall profitability. 0.0
2015A 2016A 2017F 2018F 2019F

Source: Company, DBS Bank

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 Company Guide
Breadtalk Group Ltd

Appendix 1: A look at Company's listed history – what drives

recent share price?
Share price has been driven by various factors including earnings, properties and strategic investors

(S$) Sale and earnings growth

declined, higher interest costs,
1.80 lower net margins
Re-rated on new BreadTalk
1.60 IHQ building and Minor
International taking a stake

1.40
1.20
1.00
0.80
0.60
Earnings turnaround
Gain in Perennial CHIJMES
0.40 investment, operating
margin expansion
0.20
0.00
Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17
Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17
Oct-11

Oct-12

Oct-13

Oct-14

Oct-15

Oct-16
Jul-11

Jul-12

Jul-13

Jul-14

Jul-15

Source: DBS BankJul-16

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Company Guide
Breadtalk Group Ltd

Leverage & Asset Turnover (x)

Balance Sheet: 1.40
1.2

1.20 1.2
Cash business, balance sheet currently in net debt. As with all
1.00
food service companies, BreadTalk is a cash business. The 1.2
0.80
business generates S$65-90m of operating cashflows annually
0.60
and S$28-54m of positive free cashflows in the last three years. 1.1

0.40
Net debt as of end-Dec 16 is about S$60.7m, equivalent to 1.1
approximately S$0.22 per share, or net debt ratio 0.3x. 0.20

BreadTalk was in net cash till FY12 when it built its BreadTalk 0.00
2015A 2016A 2017F 2018F 2019F
1.1

IHQ. In FY13 when it opened its IHQ, net debt was S$89m. It Gross Debt to Equity (LHS) Asset Turnover (RHS)

further issued S$75m of bonds in FY16 due 1 April 2019 at

Capital Expenditure
4.6% coupon for general corporate purposes, including S$m
refinancing of existing borrowings, and financing capital 41.0

expenditure and general working capital. 40.0

39.0

Share Price Drivers: 38.0

37.0
Changes to property holdings are likely to drive share price. 36.0
Valuations for BreadTalk re-rated to an all-time high when it
35.0
moved into its IHQ in 2013. Similarly, when it sold 112 Katong 2015A 2016A 2017F 2018F 2019F

last year and declared special dividends, its share price re-rated Capital Expenditure (-)

as well. In 4Q16, BreadTalk announced the sale of 111 ROE (%)

Somerset, which has also lifted BreadTalk’s share price in
18.0%
anticipation of special dividends.
16.0%
14.0%
Key Risks: 12.0%
10.0%

Food safety and licences. As a restaurant operator, it is 8.0%

6.0%
important to maintain food safety. Lapses would lead to
4.0%
reputational risks and in extreme cases, food operation licences 2.0%
could be revoked. 0.0%
2015A 2016A 2017F 2018F 2019F

Negative publicity affects consumer confidence and the Forward PE Band (x)
marketability of its franchise. BreadTalk has had some negative (x)
publicity, especially in 2015 over food safety and food 41.9 +2sd: 41.3x
preparation procedures in Singapore and China. Incidences 36.9

such as these can generate negative responses from the public 31.9 +1sd: 32.9x

which can potentially affect sales as well as the marketability of 26.9

Avg: 24.5x
its franchise overseas. 21.9

16.9 ‐1sd: 16.1x
Company Background 11.9

6.9 ‐2sd: 7.7x
Jun-13 Jun-14 Jun-15 Jun-16
BreadTalk Group is a Singapore-based food and beverage
(F&B) group engaged in the operations and franchising of PB Band (x)
bakery/confectionery outlets, food courts and restaurants (x)
across the region. BreadTalk’s portfolio currently has six brands 4.2

– BreadTalk, ToastBox, Food Republic, Ramen Play, San Pou Tei

3.7 +2sd: 3.65x
and Din Tai Fung. It operates over 900 outlets across 17
countries. 3.2 +1sd: 3.23x

Avg: 2.82x
2.7

‐1sd: 2.41x
2.2
‐2sd: 1.99x
1.7
Jun-13 Jun-14 Jun-15 Jun-16

Source: Company, DBS Bank

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Breadtalk Group Ltd

Key Assumptions
FY Dec 2015A 2016A 2017F 2018F 2019F
Bakery outlets 862 862 867 872 877
Restaurant outlets 30.0 32.0 34.0 36.0 38.0
Food court outlets 65.0 57.0 61.0 61.0 61.0
Total 957 951 962 969 976
Annual sales per outlet 0.65 0.65 0.67 0.69 0.72

Segmental Breakdown
FY Dec 2015A 2016A 2017F 2018F 2019F
Revenues (S$m)
Bakery operations 308 306 314 322 330
Restaurant sales 143 150 163 176 189
Food court income 173 159 167 175 184
Others 0.0 0.0 0.0 0.0 0.0

Total 624 615 643 673 704

Operating profit (S$m)
Bakery operations 5.15 12.6 14.1 14.5 14.9
Restaurant sales 25.8 23.2 25.2 27.3 29.3
Food court income (2.9) (7.5) 2.50 2.63 2.76
Others 4.51 4.18 0.0 0.0 0.0

Total 32.6 32.5 41.9 44.4 47.0

Operating profit (S$m)
Bakery operations 1.7 4.1 4.5 4.5 4.5
Restaurant sales 18.0 15.4 15.5 15.5 15.5
Food court income (1.7) (4.7) 1.5 1.5 1.5
Others N/A N/A N/A N/A N/A

Total 5.2 5.3 6.5 6.6 6.7

Income Statement (S$m)

FY Dec 2015A 2016A 2017F 2018F 2019F
Revenue 624 615 643 673 704
Cost of Goods Sold (294) (278) (283) (296) (310)
Gross Profit 330 337 360 377 394
Other Opng (Exp)/Inc (298) (305) (318) (332) (347)
Operating Profit 32.6 32.5 41.9 44.4 47.0
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (1.3) (0.8) 0.87 0.92 0.96
Net Interest (Exp)/Inc (1.3) (4.8) (4.8) (3.9) (3.2)
Exceptional Gain/(Loss) (4.6) 2.80 9.95 0.0 0.0
Pre-tax Profit 25.4 29.7 47.9 41.4 44.7
Tax (10.8) (12.1) (10.8) (9.5) (10.3)
Minority Interest (7.0) (6.2) (10.0) (8.7) (9.3)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 7.60 11.4 27.1 23.2 25.1
Net Profit before Except. 12.2 8.63 17.2 23.2 25.1
EBITDA 80.9 80.0 93.1 97.8 103
Growth
Revenue Gth (%) 5.9 (1.5) 4.6 4.6 4.5
EBITDA Gth (%) 0.6 (1.1) 16.4 5.0 5.0
Opg Profit Gth (%) 30.8 (0.2) 28.7 6.0 5.8
Net Profit Gth (Pre-ex) (%) (45.0) (29.2) 98.9 35.2 8.0
Margins & Ratio
Gross Margins (%) 52.9 54.9 56.0 56.0 56.0
Opg Profit Margin (%) 5.2 5.3 6.5 6.6 6.7
Net Profit Margin (%) 1.2 1.9 4.2 3.4 3.6
ROAE (%) 6.0 8.8 19.5 15.0 14.6
ROA (%) 1.4 2.1 5.0 4.1 4.2
ROCE (%) 5.2 5.4 9.2 9.2 9.1
Div Payout Ratio (%) 55.6 94.7 46.7 30.3 28.1
Net Interest Cover (x) 24.7 6.8 8.7 11.3 14.5
Source: Company, DBS Bank

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Breadtalk Group Ltd

Quarterly / Interim Income Statement (S$m)

FY Dec 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017

Revenue 155 150 157 153 148

Cost of Goods Sold (73.5) (67.4) (68.8) (67.8) (66.7)
Gross Profit 81.1 82.4 88.5 85.5 80.9
Other Oper. (Exp)/Inc (73.9) (75.7) (79.6) (75.8) (75.3)
Operating Profit (1.0) 10.3 13.2 9.71 5.63
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (0.3) 0.0 0.56 (1.0) 0.38
Net Interest (Exp)/Inc (1.1) (1.5) (1.2) (0.9) (1.0)
Exceptional Gain/(Loss) 8.19 (3.5) (4.2) 2.40 9.95
Pre-tax Profit 5.70 5.15 8.32 10.1 15.0
Tax (2.3) (2.2) (3.0) (4.7) (2.6)
Minority Interest (1.0) (1.7) (2.1) (1.4) (1.7)
Net Profit 2.45 1.31 3.26 4.02 10.7
Net profit bef Except. (5.7) 4.85 7.50 1.63 0.74
EBITDA 11.4 21.9 25.9 20.4 18.6

Growth
Revenue Gth (%) (0.3) (3.1) 5.1 (2.6) (3.7)
EBITDA Gth (%) (55.8) 91.6 18.0 (21.2) (8.7)
Opg Profit Gth (%) (107.2) (1,086.7) 28.4 (26.3) (42.0)
Net Profit Gth (Pre-ex) (%) (200.2) (184.3) 54.8 (78.3) (54.6)
Margins
Gross Margins (%) 52.5 55.0 56.3 55.8 54.8
Opg Profit Margins (%) (0.7) 6.9 8.4 6.3 3.8
Net Profit Margins (%) 1.6 0.9 2.1 2.6 7.2

Balance Sheet (S$m)

FY Dec 2015A 2016A 2017F 2018F 2019F

Net Fixed Assets 206 181 171 159 145

Invts in Associates & JVs 33.9 35.3 36.1 37.1 38.0
Other LT Assets 126 105 105 104 104
Cash & ST Invts 102 138 159 197 239
Inventory 9.88 9.81 10.00 10.5 10.9
Debtors 60.0 59.2 62.4 65.3 68.2
Other Current Assets 7.28 6.46 6.46 6.46 6.46
Total Assets 545 534 550 579 611

ST Debt 82.0 31.5 31.5 31.5 31.5

Creditor 94.1 86.8 91.9 96.2 101
Other Current Liab 86.1 99.8 99.8 99.8 99.8
LT Debt 120 150 136 136 136
Other LT Liabilities 16.8 14.5 14.5 14.5 14.5
Shareholder’s Equity 129 132 146 163 181
Minority Interests 17.2 19.9 29.9 38.6 47.9
Total Cap. & Liab. 545 534 550 579 611

Non-Cash Wkg. Capital (103) (111) (113) (114) (115)

Net Cash/(Debt) (99.6) (43.5) (7.9) 29.5 71.6
Debtors Turn (avg days) 33.5 35.4 34.5 34.6 34.6
Creditors Turn (avg days) 143.3 144.1 140.1 140.9 140.9
Inventory Turn (avg days) 15.3 15.7 15.5 15.3 15.3
Asset Turnover (x) 1.2 1.1 1.2 1.2 1.2
Current Ratio (x) 0.7 1.0 1.1 1.2 1.4
Quick Ratio (x) 0.6 0.9 1.0 1.2 1.3
Net Debt/Equity (X) 0.7 0.3 0.0 CASH CASH
Net Debt/Equity ex MI (X) 0.8 0.3 0.1 CASH CASH
Capex to Debt (%) 18.6 20.2 23.9 23.9 23.9
Z-Score (X) 2.0 2.2 2.4 2.5 2.5
Source: Company, DBS Bank

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Cash Flow Statement (S$m)

FY Dec 2015A 2016A 2017F 2018F 2019F

Pre-Tax Profit 25.4 29.7 47.9 41.4 44.7

Dep. & Amort. 49.6 48.3 50.4 52.5 54.7
Tax Paid (6.9) (9.1) (10.8) (9.5) (10.3)
Assoc. & JV Inc/(loss) 1.31 0.83 (0.9) (0.9) (1.0)
Chg in Wkg.Cap. 0.42 10.2 1.71 0.95 0.98
Other Operating CF (3.4) 9.20 0.0 0.0 0.0
Net Operating CF 66.5 89.2 88.3 84.4 89.2
Capital Exp.(net) (37.5) (36.7) (40.0) (40.0) (40.0)
Other Invts.(net) (20.4) 16.3 0.0 0.0 0.0
Invts in Assoc. & JV (22.9) (2.8) 0.0 0.0 0.0
Div from Assoc & JV 1.19 0.46 0.0 0.0 0.0
Other Investing CF 21.7 (2.3) 0.0 0.0 0.0
Net Investing CF (57.9) (25.0) (40.0) (40.0) (40.0)
Div Paid (4.2) (8.0) (12.7) (7.0) (7.0)
Chg in Gross Debt 3.60 (20.6) (14.0) 0.0 0.0
Capital Issues (0.7) 0.0 0.0 0.0 0.0
Other Financing CF (8.7) (9.6) 0.0 0.0 0.0
Net Financing CF (10.0) (38.2) (26.7) (7.0) (7.0)
Currency Adjustments 0.82 (0.4) 0.0 0.0 0.0
Chg in Cash (0.6) 25.7 21.6 37.4 42.1
Opg CFPS (S cts) 23.5 28.1 30.8 29.7 31.3
Free CFPS (S cts) 10.3 18.7 17.2 15.8 17.5
Source: Company, DBS Bank

Target Price & Ratings History

1.73
S$
12- mt h
Dat e of Closing
1.63 S.No. T arget Rat ing
Report Pric e
Pric e
1.53 2 1: 04 Apr 17 1.40 1.69 BUY
2: 04 May 17 1.49 1.69 BUY
1.43

1.33 1

1.23

1.13

1.03

0.93
Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Bank

Analyst: Alfie YEO
Andy SIM CFA

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Breadtalk Group Ltd

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

Completed Date: 9 Jun 2017 07:20:47 (SGT)

Dissemination Date: 9 Jun 2017 07:28:42 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
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associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
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Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
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which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
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UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
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assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

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 Company Guide
Breadtalk Group Ltd

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned
herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity
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ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies
and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation
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responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or
the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate
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2
not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates do not have a
proprietary position in the securities recommended in this report as of 28 Apr 2017.
2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research
Report.

Compensation for investment banking services:

3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
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Disclosure of previous investment recommendation produced:

4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS
Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person
accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
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does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new
listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Breadtalk Group Ltd

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intended for institutional clients only and no other person may act upon it.

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Breadtalk Group Ltd

United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.
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