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Neo Group
06-10-2010, 12:35 PM,
Post: #1
NEO Garden - A home-grown rags-to-riches tale
MR NEO Kah Kiat lives in Sentosa Cove, drives a Mercedes S-Class and owns a company worth tens of millions, but it is unlikely that you have heard of the media-shy entrepreneur.

You might have eaten his food, though.

The 39-year-old managing director of food enterprise Neo Group owns three catering companies, a restaurant, a yacht chartering service, a sushi chain and a wine cellar.

He likes to keep a low profile, grinning shyly at guests and nibbling quietly on his food even at media events where the buffet spread is sponsored by his company

Nevertheless, Mr Neo is his vigorous self again the moment he steps into his office in Wan Lee Road.

The Hokkien businessman breaks into a big smile when this reporter asks him if he would prefer to be interviewed in Mandarin.

What pours out over the next hour or so is a spell-binding rags-to-riches tale that has never been told to the press before.

He is the third of four sons.

Mr Neo's family was so poor that utilities got cut off every once in a while, and they had wooden planks nailed to the windows to keep out the sun and rain.

"If the planks fell off, we'd use cloth to cover the gap. When there was no electricity, we'd use candles," he said.

"Whenever I drove my relative's goods van and my mum sat beside me, she would remind me to be extra careful when we were near a Mercedes-Benz.

"She'd say: 'Don't drive too close to it.

It's a rich person's car... Better keep a distance lest they think we'll scratch it.'

"I never forgot that. I wanted to be behind the wheel of that Mercedes. So I swore to myself that, one day, I would be successful and respected, and my first car would be none other than a Mercedes-Benz."

That said, he didn't run to the Cycle & Carriage showroom the moment he had money in his pocket. Despite being able to afford his current car - a glossy Dolomite brown S350 (price? $355,888) - at 32 years of age, he chose to wait until six months ago before buying it. In between, he opted to drive smaller Mercedes models.

A believer of delayed gratification, he prefers to pay off his loans and reinvest gains back into his business so its capacity can grow. Greater capacity means greater profits, he reasoned.

Something at his (leased) four-storey building at 6A Wan Lee Road is constantly being renovated to make way for more orders, for instance.

This year, the record number of orders met in a day exceeded 500 during Chinese New Year. Hence, his goal for the Year of the Rabbit: 800 orders.

Some caterers are unable to grow their business because they let their chefs run the kitchen, he opined.

That is why he has designed a synchronised cooking system of sorts to cope with orders.

Each chef in the kitchen is designated to cook only one dish, so a complete buffet of eight dishes can be turned out every two minutes.

"You cannot let the chef control your kitchen, as only the boss knows the capacity of his resources best. Some caterers say that their chefs are artists. But can you teach an artist how to paint? He is not going to listen to you.

"When we're shorthanded, even my directors have to roll up their long sleeves, don the Neo Group polo tee and make deliveries," he said.

What about himself? this reporter asks. After all, this is the same guy who still visits the fish market with his employees at 4am every Tuesday and Wednesday, to select the choicest items.

He also devises the recipes, including in-house-made sauces, batters and pastes. Every day at noon, he tastes the food before it leaves for its destination.

This is also the man who, when faced with a midnight fire that destroyed his first-floor kitchen two weeks before Chinese New Year in 2007, refused to cancel any orders.

Sitting calmly in his office at 6am, he transferred the seven buffet orders for the day to his East kitchen, called up electricians and stove makers to repair the damage, and set up makeshift arrangements for chefs on the second floor. By the third day, things were back to normal.

"I can't leave my office. I have to take care of things here," he replies. In Mandarin and English, he adds: "I tell my employees, I may have diversified the business, but I myself - my attention - is not 'diversified'."

To motivate his staff, they have to sing a company anthem and recite a pledge every morning and evening.

Gesturing at his flat-screen computer monitor mounted on the wall, he shows how he is able to monitor every nook and cranny of his company's premises.

"Before you came in, I just called the second floor to ask why they hadn't brought the fried rice out after it was cooked," he said.

He targets a 20 to 30 per cent growth in business per year. The group is particularly aggressive in expanding this year, adding a yacht chartering service and opening a restaurant in Jurong West.

But, ultimately, he dreams that catering will one day be a respected industry with industry standards, just like restaurants.

Education: He was a top student at Bedok Town Secondary School but chose to drop out after Secondary 2 as he felt that a diploma or a degree would not guarantee riches and respect.

His family was desperately poor at the time and he wanted to start earning money as quickly as possible.

He requested to enlist for national service a year earlier so that he could start his business at a younger age.

Career: Between ages 15 and 17, he helped out at a relative's chap chye peng (economical rice) stall, amassing useful experience he would need later when he started his business at the age of 20.

In 1992, with a capital of $15,000 borrowed from relatives and friends, he leased a small kitchen in Joo Chiat and hired eight staff, including housewives and novice cooks as he could not afford professional chefs. He named his catering business "Neo Garden Restaurant" as he wanted to give his customers the impression that they were ordering restaurant grade food.

Twelve years later, he moved his kitchen to larger premises at 6A Wan Lee Road and launched a halal catering arm, Deli Hub, in 2005. He continued expanding his premises, purchasing another kitchen in the eastern part of Singapore, and incorporated Neo Group in 2008.

He created the more high-end Orange Clove Catering and Japanese sushi chain Niwa Sushi later that year. Niwa Sushi is currently being rebranded as Umi Sushi.

Today, Neo Group is the parent company of three catering businesses, a wine cellar, a Japanese food-outlet chain, a restaurant and a yacht catering service.

His company has a total of 277 staff to date and turns over an eight-figure sum in revenue yearly.

>> ASIAONE / BUSINESS / SME CENTRAL / PRIME MOVERS / STORY

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03-07-2012, 07:43 AM, (This post was last modified: 12-07-2012, 09:38 AM by Musicwhiz.)
Post: #2
Neo Group
The Straits Times
Jul 3, 2012
Companies
Food caterer goes for IPO despite weak market appetite


FOOD caterer Neo Group hopes investors will be tempted to take a bite of its initial public offering (IPO) despite the weak appetite for new listings this year.

The company, which also runs a business selling Japanese convenience foods islandwide, aims to raise net proceeds of $5 million in an IPO ahead of a Catalist listing.

Neo Group wants to sell one million new shares to the public at 30 cents each. Another 21 million new shares will be placed out to institutional investors. This means that 15.3 per cent of the company will be in retail or institutional hands after the offer.

The IPO starts today and runs to noon next Monday. Trading of the shares is expected to start next Wednesday.

'Going for a listing will build up the company's image, to attract more talent and open up more business opportunities,' said chairman and chief executive Neo Kah Kiat at a briefing yesterday. 'When you bid for contracts, in terms of government projects, it will be much easier.'

Neo Group was set up in 1992 by Mr Neo. Its main business, giving 78 per cent of revenues in the year to Jan 31, is food catering.

It has three subsidiaries in this area: Neo Garden Catering, Orange Clove and Deli Hub.

A Neo Group statement said that in April, it was ranked by Euromonitor International as the top caterer for social and corporate events here. It has 9 per cent share of the $300 million a year events catering market.

The other 22 per cent of revenue came from the food retail business. Neo Group runs 16 Umisushi outlets islandwide, offering Japanese foods such as sushi.

To support its operations, Neo Group has four central kitchens. There are also two units responsible for sourcing food products and ingredients, as well as a fleet of food delivery vehicles. In all, it employs more than 400 staff.

Net profit for the year to Jan 31 was $5.4 million, up from $2.8 million a year ago. Revenue grew to $38.4 million, from $30 million.

The company said it will distribute as dividends at least 60 per cent of net profits for the financial years ending Jan 31, 2013, 2014 and 2015.

A back of the envelope calculation shows earnings per share of about 3.75 cents, based on the most recent full-year profit of $5.4 million and post-IPO share capital of 144 million shares.

A 60 per cent payout ratio will give a dividend of 2.25 cents per share, or a yield of 7.5 per cent based on the 30-cent IPO price.

Neo Group's existing shareholders have each undertaken not to sell any of their holdings in the first year after listing.

In the second year, they may sell up to 30 per cent, and up to 60 per cent in the third year. No restrictions on the sale of stock from existing shareholders will apply from the fourth year.

The IPO net proceeds will be used to expand the food catering and food retail businesses, which may include acquisitions, joint ventures or strategic alliances.

Neo Group's statement said its plans include developing its newly acquired property at Quality Road into a multi-storey building, for three years, starting from the first quarter of next year.

After that, it wants to consolidate most of its central kitchens, offices, warehouses, logistics and other operations there. It says that the move will allow it to serve 30,000 persons a day, up from 15,000 persons a day currently.

The company also wants to increase the number of Umisushi food retail outlets to 30 by 2016.

The Singapore branch of CIMB Bank is the IPO sponsor while CIMB Securities (Singapore) is the underwriter and placement agent.

Other listed food caterers here include Select Group, which also has other businesses.

The listing comes amid a particularly quiet year for capital markets. According to Thomson Reuters data, only US$4.6 billion (S$5.8 billion) was raised here in the first half of the year, the lowest half-year level since 2005 when just US$4 billion worth of deals were cut.

JONATHAN KWOK
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/

http://sgmusicwhiz.blogspot.com
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04-07-2012, 10:18 PM, (This post was last modified: 04-07-2012, 10:22 PM by ValueBeliever.)
Post: #3
RE: Neo Group (IPO)
Took a long comparison of Old Chang Kee, Select Group vs Neo.

All the CEO rise thru hard work. But incredibly, its Mr Neo that won by a wide margin. The growth is great and bottomline has been consistently higher than the other two.

It is that drive to succeed and no turning back that probably drive Mr Neo from a young age. Mind you at 40+ he's got a long way to go!!

It just that I dont fancy japanese food too much. Guess they have been growing so many of these TO-GO Umishusi must be doing well? They are solidly in the catering and probably driving it much better than Select.

In my HDB estate, sushi shop TO-Go is also popping up! Not sure how good are they. Can anyone comment on Umishusi?

1 thing 4sure, the Catering business margin is the highest and probably with all the small rental shop, the rent portion is much smaller than operating restaurant. That is probably the secret of Neo! See he wants IPO to buy into the consolidation of central kitchen?

I may be wrong but sounds like Neo is indeed much better than any of our listed food business so far? However, IPO of food Co. generally do not go far, after a couple of weeks they all fall below IPO price - I may be wrong?

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04-07-2012, 10:31 PM,
Post: #4
RE: Neo Group (IPO)
I think Japan Food (listed in 2009) has done pretty well in terms of capital appreciation + dividends. ABR Holdings is another F&B player which have given good returns to shareholders.

(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.

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04-07-2012, 10:49 PM,
Post: #5
RE: Neo Group (IPO)
(04-07-2012, 10:31 PM)Nick Wrote: I think Japan Food (listed in 2009) has done pretty well in terms of capital appreciation + dividends. ABR Holdings is another F&B player which have given good returns to shareholders.

(Not Vested)

Not following Japan food, will take note. ABR wow! the day they cash out on coca tree, I couldnt believe their luck!

Have been trying to buy some for keep - but not easy all their spread is very wide quote!

Problem is all the food business shares are very slow moving, not like industrial sector. Very long gestation and you got to have the patience to let the CEO execute their growth.

Spore is food everywhere - competition drive down the margin. Plus all the Reits take up your rent + sales proceeds. Look at breadtalk, can growth revenue, but margin cant go up!!

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05-07-2012, 01:15 PM,
Post: #6
RE: Neo Group (IPO)
Something doesn't look right in the numbers.

Net margins jumped by 5 percentage points from 9% to 14% between fy11 to fy12. That's a 50% jump in net margins. This is highly unusual for catering and retail f&b business, mainly because prices (both cost items and sales) are not volatile. This huge rise in margins is mainly due to another suspicious figure; falling 'purchases and consumables' relative to total revenue and expense.

Revenue 22,654. 29,998 38,376
Purchases and consumables used. 9,388. 11,506. 12,080

"Our purchases and consumables used as a percentage to total revenue decreased from 38.4% in FY2011 to 31.5% in FY2012."

"This decline is attributable to the favourable pricing we are able to enjoy from bulk procurement of raw materials from our suppliers. This is attributable to our strategy of increasing our special menus during festive seasons which allows us to engage in bulk procurement"

Between 2010 and 2012, prices of food commodities have been steadily rising. Not much, but it has not fallen. The kind of discount they are getting, does not look realistic at all.

I don't suppose the profits are false. The jump in margins is probably contributed by 'other income' which is not stated. or perhaps they have an agreement with suppliers to delay the invoices?

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05-07-2012, 02:46 PM,
Post: #7
RE: Neo Group (IPO)
http://www.neogroup.com.sg/brands/

Didn't know they have 5 different brands under Neo Group. Neo Yacht sound interesting Smile
The toughest thing to do is have to wait for the opportunity patiently.

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05-07-2012, 04:41 PM,
Post: #8
RE: Neo Group (IPO)
To be frank, due to the competitive nature of the F&B business in Singapore, I would avoid most at all costs. In the words of Buffett, there is no economic moat for F&B businesses in Singapore.

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06-07-2012, 02:40 AM,
Post: #9
RE: Neo Group (IPO)
Ate their catered food before and it tastes not bad for the price. There is little differentiation in this segment of the f&b market and little barriers to entry. Not the type of business I'd want a share in personally.

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06-07-2012, 06:04 PM,
Post: #10
RE: Neo Group (IPO)
What a coincidence. Went for a workshop today and the pack lunch was from Orange Clove.

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