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?
Reader:
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?
Assi AK:
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.
 |
| Tsk, tsk... |
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.
Related posts:
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.)
I am not vested in breadtalk. But using P/E and dividend yield might not be a good valuation metric to measure breadtalk.
ReplyDeleteI have read Breadtalk annual reports for 2012-2015, i believe their earning are affected by high appreciation and amortization.
A more accurate valuation might be price to cash flow and PEG ratio. The result might show a more reasonable valuation.
As i change my focus from growth to income gradually, i still awaits a greater MOS from its estimated Intrinsic value.
I am not vested in breadtalk. But using P/E and dividend yield might not be a good valuation metric to measure breadtalk.
ReplyDeleteI have read Breadtalk annual reports for 2012-2015, i believe their earning are affected by high appreciation and amortization.
A more accurate valuation might be price to cash flow and PEG ratio. The result might show a more reasonable valuation.
As i change my focus from growth to income gradually, i still awaits a greater MOS from its estimated Intrinsic value.
Hi Solace,
ReplyDeleteMaybe another guest blog from you and this time on Breadtalk? ;p
Some friends believe that Breadtalk's intrinsic value is much higher than its share price today. I think you might know who I am talking about. ;)
Like you, their focus is on the strong cash flow. I don't know about PEG. Too cheem for me. -.-"
Anyway, I decided to nibble on its recent price weakness based on the strong cash flow from operations and what it could mean. Crossing fingers.
The question is, can BT cut capex? As my understanding, F&B need renovate frequently to have better image to attractive people, if so, maybe hard to cut capex. Any industrial insider?
ReplyDeleteHi Ah John,
ReplyDeleteI feel that if the founder is less adventurous when it comes to new markets and new concepts, BT will do much better. Just stick to tried and tested ideas. Things will improve tremendously then.
It is OK to spend money on money making businesses. Spending money on money losing businesses and using money from money making businesses to make up for the losses is a problem.
Hi AK,
ReplyDeleteWould you be able to share some thoughts on why you prefer to nibble on Breadtalk over Jumbo? (I assume it's not becos you prefer xiao long bao over chili crab) :)
Thanks.
Hi K,
ReplyDeleteI don't eat crab. So, I do prefer XLB over chili crab. ;)
I don't eat most seafood. So, I don't patronise Jumbo Seafood and it was never on my radar. I would welcome any insights you might have about Jumbo. :)
Reader:
ReplyDeleteyour breadtalk business always so good
always many people n Q
even this hour at MBS also. esp ding tai fung now still long Q
AK:
XLB FTW
Reader:
wow abcdefg 😅
AK:
I will go eat XLB this evening 😜
Reader:
whats xlb
ftw?
oh i get it xiao looooong bao
AK:
so clever
Reader:
ftw?
eat at DTF? or WTF
haha
the less crowd should be at One raffles
AK:
:o
No no no
Not WTF
ish FTW
How would you compare Jumbo to Breadtalk? Both are F&B, both have high PE, both have strong recognizable brands. Thanks.
ReplyDeleteHi K,
ReplyDeleteI have always hated seafood. An irrational fear of crabs, prawns and other such stuff. So, I have not looked at Jumbo. This is the truth. -.-"
Reader:
ReplyDeleteThank you AK for the great sharing today (i.e. Evening with AK and friends).
I learnt a lot. Esp on the critical illness plan, gain new perspective. N BreadTalk. Time to take a gd look at this stock.
Reader says...
ReplyDeleteCan talk to yourself about breadtalk n the reasonable price for invest after the share split recently. Thanks.
AK says...
I invested in BT when it was $1 a share.
I explained my decision in 2016.
After the stock split, my investment has more than doubled in value.
At the current price, I think it is probably fair value.
http://singaporeanstocksinvestor.blogspot.com/2016/11/breadtalk-old-chang-kee-and-qaf-limited.html
ReplyDeleteDo you think this is a good chance to buy into BT ?
https://www.businesstimes.com.sg/companies-markets/breadtalk-expects-fy2019-net-loss-on-hk-unrest-fb-weakness
Hi Betta man,
ReplyDeleteA good chance?
Sounds like you are asking me to make a guess.
As guesses go, your guess is as good as mine. ;)