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07-07-2012, 11:51 AM
I am pretty impressed by its founder Mr Neo Kah Kiat as I have read about him in an article on Straits Times before. Didn't think that they will get listed at that time.
http://www.spring.gov.sg/NewsEvents/ITN/...20425.aspx
Catering is a better business than food retail as seen from their profit margin. I heard from my friend who is working at select catering that the cost of food is cheap but they can market it at a higher prices.
Main reason for the sharp expansion of margin is that "Our purchases and consumables used as a percentage of total revenue declined by 3.0% from 41.4% in FY2010 to 38.4% in FY2011. This decline is attributable to the favourable pricing we were able to enjoy from bulk procurement of raw materials from our suppliers through the establishment of our Food and Catering Supplies Business in FY2011, and our continuing efforts to control and reduce food wastage, and sourcing of supplies at competitive prices"
Key risks involved will be that this seemed to be an industry with little barrier of entry with the existence of many small scale caterers as well. While its brand and reputation are sound, I think that real competitive advantage needs to be built on scale - having the ability to cater to huge orders which a lot of the small caterers will not be able to meet.
Another risk is that most of the leases are negotiated every 3 years or less which will subject them to rental inflation. And as expected, the food retail segment has been making losses for the past 3 years. And their FCF is negative for the past 3 years though this might be due to the expansion of their food retail
http://www.spring.gov.sg/NewsEvents/ITN/...20425.aspx
Catering is a better business than food retail as seen from their profit margin. I heard from my friend who is working at select catering that the cost of food is cheap but they can market it at a higher prices.
Main reason for the sharp expansion of margin is that "Our purchases and consumables used as a percentage of total revenue declined by 3.0% from 41.4% in FY2010 to 38.4% in FY2011. This decline is attributable to the favourable pricing we were able to enjoy from bulk procurement of raw materials from our suppliers through the establishment of our Food and Catering Supplies Business in FY2011, and our continuing efforts to control and reduce food wastage, and sourcing of supplies at competitive prices"
Key risks involved will be that this seemed to be an industry with little barrier of entry with the existence of many small scale caterers as well. While its brand and reputation are sound, I think that real competitive advantage needs to be built on scale - having the ability to cater to huge orders which a lot of the small caterers will not be able to meet.
Another risk is that most of the leases are negotiated every 3 years or less which will subject them to rental inflation. And as expected, the food retail segment has been making losses for the past 3 years. And their FCF is negative for the past 3 years though this might be due to the expansion of their food retail