Tiger Singapore Weekly Focus: JAPAN FOODS'Outlook
$JAPAN FOODS HOLDING LTD.(5OI.SI)$ success and Halal market expansion
Corporate Profile of Japan Foods Holding Ltd
Established in Singapore in 1997, Japan Foods is one of the leading Japanese restaurant chains in Singapore. The company has successfully expanded its restaurant portfolio to encompass both self-developed and franchised Japanese concept brands.
Japan Foods has 56 self-operated restaurants in Singapore, 24 restaurants run by associated companies in China, Hong Kong and Indonesia, and 3 restaurants operate by joint venture company. Among its top franchised brands are Ajisen Ramen, Afuri and Osaka Ohsho chains.
Expanding Halal segment
Japan Foods’ R&D department developed and created new recipes and concepts for the Halal segment during the past two years. During these times, the company has expanded to nine restaurants operating under three brands including one “Edo Shokudo” restaurant, seven “Tokyo Shokudo” restaurants and one “Yakiniku Shokudo” restaurant.
Responses from the Muslim market has exceeded expectations and is now the company fastest growing segment, contributing 20.5% to the total revenue for FY2022.
FY2022 Financial Roundup
In FY2022, Japan Foods achieved a 7.1% year-on-year increase in revenue to S$54.6 million as compared to S$51.0 million in the corresponding financial year in 2021. The outperforming Halal segment has contributed to much of this improved YOY result. Rising in tandem with the improved revenue, gross profit came in 6.9% higher
YOY to S$46.2 million, while gross profit margin remained healthy at 84.6%.
However, the company incurred higher expenses due to the ramping up of its operations in expectation of post-COVID-19 re-opening. In addition, other income fell due to a decrease in government grants and lower rental concessions from landlords. This resulted in a 10.8% YOY decline in our net profit to S$3.2 million in FY2022. Japan Foods’ financial position remains strong with a slight increase in cash and bank balances to S$23.2 million as of 31 March 2022.
The total dividend payment for FY2022 will be S$1.85 per shares per share paid in December 2021 comprising of the interim dividend of S$0.005 and the proposed final dividend of S$0.0135. This represents a total dividend payout of 99.8% of the Japan Foods’ net profit in FY2022.
Dividend Yield Table
The F&B sector will continue to face challenges in the next 12 months due to factors such as manpower crunch and higher cost of raw materials. The high demand for F&B staffs have led to an increase in staff costs and manpower expenses are likely to continue to increase in the coming months. Supply Chain disruptions from
wars, Indonesia changes in palm oil exports and Malaysia’s ban on poultry exports have also led to higher raw material costs.
Besides developing its Halal brands, Japan Foods has streamlined its operations over the years by increasing efficiency and reduce reliance on labour. A central kitchen was established to prepare raw ingredients for most of its restaurants and the introducing of IPAD self- ordering system has further decrease the use of manpower.
Japan Foods business model is likely to remain sound due to its strong restaurant’s portfolio and its well-positioned restaurants in high consumer footfalls malls. Its healthy balance sheet and long-term debt-free position also put the company in good shape for the challenging F&B environment ahead.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.