Tough times ahead for F&B industry.

The rapid influx of foreign workers up till the last General Election caused strains in our society in many ways and the PAP government learned the hard way that Singaporeans were unhappy.

Singaporeans "dealing with the strain on infrastructure resulting from the influx of foreign workers, had signalled that they were prepared to trade off a bit of growth in return for a reduction in immigration.

"Any elected government has to, at the end of the day, take into account and work according to the wishes of the people," Mr Shanmugam, Minister for Foreign Affairs and Law, said.

"... some of the service sectors, like restaurants, are feeling the pinch... "

(Source: The Business Times Weekend, July 6-7, 2013)

There could be pockets of relative strength in the F&B industry in Singapore and I believe Old Chang Kee is one such company.

Companies which run restaurants requiring big floor areas for diners, teams of waiters and waitresses, cooks and washing staff will face stronger headwinds over time.

Related posts:
1. Old Chang Kee: Almost 70c a share.
2. Soup Restaurant: Almost fully divested.

"In the financial year ended March 31, 2013, Tung Lok sunk deeper into the red with a net loss of $3.17 million... "

(Source: Tung Lok plans 2 for 5 rights issue, The Business Times Weekend, July 6-7, 2013)

Soup Restaurant: Almost fully divested.

Soup Restaurant's share price has been bumped up by the special dividend declared recently. This is good news for shareholders, whether they were hoping for capital appreciation or to collect more dividend.

However, once the counter goes XD on 7th May, we could see share price weakening significantly if Mr. Market wakes up to the fact that this stock has become relatively expensive with EPS being much lower without contributions from Dian Xiao Er.

So, bearing in mind my motivation for being vested in Soup Restaurant in the first instance, divesting my stake now makes sense as the difference between the sell price and my buy price is more than the dividend of 1.15c to be paid out. Add the two rounds of dividends I received before, the ROI over the last one year looks pretty decent.

I now retain a very small long position which is, in essence, free of cost. This means that I get to keep my shareholder's card and I will still get a 15% discount at all Soup Restaurant outlets. After all, I still visit them regularly since I like the food they serve.

Have my soup and drink it as well? Why not?

Related posts:
1. Soup Restaurant: Special dividend declared.
2. Soup Restaurant: Gain of $7.7m.
3. Tea with AK71: Soup Restaurant's S-Card.

Soup Restaurant: Special dividend declared.

When Dian Xiao Er became independent of Soup Restaurant last year, the expectation was that Soup Restaurant's earnings would be hit badly. If we look at the year 2011, 42% of Soup Restaurant's profit was contributed by Dian Xiao Er.

In 2012, although profit from continuing operations, net of tax, jumped 126.9% year on year, removing the contribution by Dian Xiao Er reveals a more modest increase of 59%. Even so, we should take note that the performance of Soup Restaurant was boosted by a one time gain from the divestment of Dian Xiao Er to the tune of $3.4m.

If we examine my initial motivation to invest in Soup Restaurant last year, a big part of it was because I thought the probability of a special dividend being declared was quite good. Of course, since I like Soup Restaurant's food and would patronise their restaurants monthly, there is the benefit of getting a discount as a shareholder during my visits too.

Well, the special dividend did not happen then as the management decided to plough the money back into the business. However, since then, I have received dividends twice and this would be my third round of dividends.

Total declared this round:
Interim dividend: 0.35c
Special dividend: 0.8c
Final dividend: 0.35c

As some would say "third time lucky" and a special dividend has been included this time round. A total dividend payout of 1.5c translates into a dividend yield of 10.95% based on the high of 13.7c per share touched this morning. Without the special dividend, dividend yield would be a less exciting 5.1% but still not too shabby.

See financial statement: here.

Related posts:
1. Soup Restaurant: Special dividend?
2. Soup Restaurant's S-card.

Tea with AK71: Inflation hits fried bee hoon.

Today, I went to the "economic fried bee hoon" store near my office to buy breakfast. I like fried bee hoon a lot. It is inexpensive and tasty. However, I would try to restrict it to once a week or fortnight. It is still less expensive to bring my own food to work (e.g. oatmeal).

I would usually order fried bee hoon with a piece of tofu to make it a more nutritious meal. Price? $1.50. If I am not feeling very hungry, I would have half of it for breakfast and keep the rest for lunch. Two meals for $1.50! I like this too.

We all know that inflation has come fast and furious to Singapore. For a while, I thought my favourite fried bee hoon would be spared as the price has remained the same since last year. I am mistaken. Today, I paid $1.70. So? It is only 20c more, right? It is actually an 11.76% increase in price!

Imagine how this would affect someone who does not have the habit of bringing food from home to work. If his eating out food bill is $300.00 a month, it would mean paying $35.37 more every month! That is enough for a nice dinner for me at Soup Restaurant and still have money left over for some grocery shopping.

With QE3 launched by the Mr. Ben Bernanke, inflation could get worse. Time to get cooking.

Related posts:
1. A simple meal.
2. Another budget meal.
3. A healthy, low cost meal.
4. Korean noodles for lunch.
5. A loaf of bread.

Tea with AK71: Soup Restaurant's S-Card.

Yeah! After weeks of waiting, I have received my S-Card from Soup Restaurant.

Some might remember that before I was a shareholder of Soup Restaurant, I blogged about how I chose to invest in Old Chang Kee instead of Soup Restaurant. That decision has turned out quite well.

Not too long ago, I explained my more recent decision to invest in Soup Restaurant. Well, it remains to be seen if my decision would bear fruit.

In the meantime, I will enjoy a discount off my bills on my periodic visits to Soup Restaurant's outlets. Yummy!

Related posts:
1. Old Chang Kee: Initiated a long position at 26c.
2. Soup Restaurant: Gain of $7.7m.

Soup Restaurant: Gain of $7.7m.

On 14 June, Soup Restaurant confirmed the sale of its stake in YES F&B Group Pte Ltd. The consideration is S$7.9m which represents an excess of some S$7.7m over the cost of investment of the Group at the end of FY2011.

The net tangible assets (NTA) per share and consolidated earnings per share (EPS) of Soup Restaurant will be positively impacted in the current FY2012. The former would see an increase of 1.18c per share while the latter would see an increase of 1.05c per share.

The completion of such a sale is not going to happen immediately. It is going to take some time but the rising OBV seems to be telling us that smart money is accumulating shares of Soup Restaurant even as its share price suffers from some weakness in recent sessions.

I bought some shares recently at 12.3c. If I do not make money from this investment, at least I would get a 15% discount when I dine at Soup Restaurant outlets in future as a shareholder. ;p

See announcement: here.

Related post:
Soup Restaurant: Special dividend?

Soup Restaurant: Special dividend?

Some of us might remember the recent saga of Soup Restaurant VS. Dian Xiao Er. For those not in the know, there was an announcement on 4 April by Soup Restaurant: read it here.

What interests me is this:

On 4 April 2012, the Plaintiffs communicated their acceptance of the Defendants’ 3 April 2012 offer. The Plaintiffs have agreed to purchase SRG and SRI’s shareholding of 50.98% in YES for the sum of S$7,901,900.00 (i.e. 50.98% of S$15,500,000.00), and for parties to withdraw or discontinue their respective claims and counterclaims in the Suit.

The Company is pleased that the Plaintiffs have accepted the Defendants’ offer without qualification, and that they have agreed to settle the Suit on the basis proposed by the Defendants. The Company is of the view that this outcome best ensures that shareholders’ value in the Company is preserved.

This was followed by another announcement by Soup Restaurant on what might they do with the money coming in. Read announcement by the Company: here.

Soup Restaurant said if the sale goes through, it has three options available to it on the use of the proceeds: distribute all the proceeds by way of a special dividend, use the proceeds to fund expansions, or distribute part of the proceeds to shareholders and deploy the balance for expansion.

Based on the number of shares on issue (298.5m shares), if Soup Restaurant were to pay out all the proceeds of $7.9m to shareholders, each share would get 2.6c in special dividend. If the Company decides to pay out half of the proceeds and retain half to fund its business expansion plans, it would still be an attractive 1.3c per share in special dividend.

Its share price closed at 12.5c in the last session.

Read the story: Dian Xiao Er no longer in the Soup.