I avoided buying Breadtalk's stock for a long time, probably for as long as I avoided buying their bread and I definitely have never bought their "fresh" soya bean milk before. All so expensive.
Yes, I know. AK is very giamsiap. Terrible!
A very high PE ratio and gearing makes the stock unpalatable. To make it even less attractive, the dividend is peanuts. Give shareholders only enough money to buy some bread, maybe.
However, I revealed that I nibbled at Breadtalk on price weakness during the last "Evening with AK and friends". Why har?
Sir, there is one thing that puzzled me. You mentioned that you bought Breadtalk, but this seems contrary to certain principles which you always talk about. For example, the stock doesn't seem cheap, seeing that the PE of 44 is near its 5-year high. Second, the stock doesn't give very high dividends (you already explained this point). It is the first point that puzzles me, since you have always talked about buying an asset when it is cheap. How come this time it is different leh?
If cash flow from ops is strong and CAPEX reduces, earnings will improve.
BT has strong CF... CAPEX needs to come down and if/when it does, earnings will go up and PER will improve. They could pay better dividend then. Not for the pure income investor.
Not for the purist income investor, to be sure, it is a smallish long position for me.
Consistent with my philosophy (remember "the pyramid") and to put things in perspective, it accounts for less than 1% of my portfolio.
1. Old Chang Kee versus Breadtalk
(Why AK prefers OCK to Breadtalk?)
2. QAF Limited.
(If you like bread, QAF is yummier!)
3. Bought cheaper bread on BREXIT!
(AK bought more at $1.03 a share.)