When compared with similar F&B companies in Singapore, Japan Food Holdings seems undervalued based on P/E and P/B ratio, since these ratios are lower than both their respective averages and medians.
I believe this could have occured because of a decrease in share price over the past few years from earnings having decreased . However, despite Earning Per Share increasing slightly recently, and share prices not increasing that much, this could lead to the lower P/E ratio.
Compared with other business models, I do believe that their brands such as Ajisen Ramen are quite defensible as well. With growing revenue and a chance to operate overseas, their shares might be undervalued. TL;DR The company houses several brand names such as Ajisen Ramen. Despite competitive F&B spaces, the firm has growing revenue and profitability.
How does the business make money?
Japan Foods Holding Ltd is an F&B group in Singapore specialising in quality and authentic Japanese cuisine. They currently operate a chain of more than 40 restaurants, with some franchise brands and some self-developed. Notable brands include Ajisen Ramen and Menya Musashi (I tried the 5X ramen before which I regretted) They have also venture d into Malaysia and Vietnam to franchise some of their brands. Basically, they are in the F&B restaurant business.
What can their financials tell us?
Revenue has grown by a Compounded Annual Growth Rate of 4.3% over the years, to 67.8m in 2018. Ajisen Ramen is actually the most popular brand generating the highest revenue of 26.8m, almost 40% of the company’s total revenue, followed by Menya Musashi. The increase in revenue can be attributed to the opening of new outlets of Ajisen Ramen a well as conversions of certain food outlets to one of their other brands.
Cashflow from operating activities look healthy and stable, being able to service their cash needs for investing and financing activities, such that the firm is mostly cashflow positive every year. This is a healthy sign since the firm’s core revenue generating activities can sustain the needs of the business.
The firm has also become more profitable over time, as shown by Return on Assets and Return on Equity increasing despite increases in both assets and equity. This is an indication that the firm is able to reap returns based on the capital that they possess. Gross Profit Margin and EPS have all improved, reflecting this trend as well. With a Net Cash for Net Debt/Equity, this shows that the firm is well leveraged, and won’t have much interest or debt payment obligations in the future.
Four-Pronged Strategy
The firm has developed these strategies which include development of new concepts, overseas expansion, cost and quality control and network expansion and consolidation.
This to me seems like the right moves to make. Developing new concepts helps to diversify revenue streams, which reduces risk and also introduce fresh concepts to the public.
With the limited Singapore market, expanding overseas is also quite necessary to tap on growing middle class bracket in Asia.
Network expansion and consolidation might help to reduce costs due to economies of scale too.
With high fixed costs like rent and staff costs, increases in revenue will more than proportionately increase profits, so expansion is quite crucial.
Valuation
When compared with similar F&B companies in Singapore, Japan Food Holdings seems undervalued based on P/E and P/B ratio, since these ratios are lower than both their respective averages and medians.
I believe this could have occured because of a decrease in share price over the past few years from earnings having decreased . However, despite Earning Per Share increasing slightly recently, and share prices not increasing that much, this could lead to the lower P/E ratio.
Compared with other business models, I do believe that their brands such as Ajisen Ramen are quite defensible as well. With growing revenue and a chance to operate overseas, their shares might be undervalued.
When compared with similar F&B companies in Singapore, Japan Food Holdings seems undervalued based on P/E and P/B ratio, since these ratios are lower than both their respective averages and medians.
I believe this could have occured because of a decrease in share price over the past few years from earnings having decreased . However, despite Earning Per Share increasing slightly recently, and share prices not increasing that much, this could lead to the lower P/E ratio.
Compared with other business models, I do believe that their brands such as Ajisen Ramen are quite defensible as well. With growing revenue and a chance to operate overseas, their shares might be undervalued. TL;DR The company houses several brand names such as Ajisen Ramen. Despite competitive F&B spaces, the firm has growing revenue and profitability.
How does the business make money?
Japan Foods Holding Ltd is an F&B group in Singapore specialising in quality and authentic Japanese cuisine. They currently operate a chain of more than 40 restaurants, with some franchise brands and some self-developed. Notable brands include Ajisen Ramen and Menya Musashi (I tried the 5X ramen before which I regretted) They have also venture d into Malaysia and Vietnam to franchise some of their brands. Basically, they are in the F&B restaurant business.
What can their financials tell us?
Revenue has grown by a Compounded Annual Growth Rate of 4.3% over the years, to 67.8m in 2018. Ajisen Ramen is actually the most popular brand generating the highest revenue of 26.8m, almost 40% of the company’s total revenue, followed by Menya Musashi. The increase in revenue can be attributed to the opening of new outlets of Ajisen Ramen a well as conversions of certain food outlets to one of their other brands.
Cashflow from operating activities look healthy and stable, being able to service their cash needs for investing and financing activities, such that the firm is mostly cashflow positive every year. This is a healthy sign since the firm’s core revenue generating activities can sustain the needs of the business.
The firm has also become more profitable over time, as shown by Return on Assets and Return on Equity increasing despite increases in both assets and equity. This is an indication that the firm is able to reap returns based on the capital that they possess. Gross Profit Margin and EPS have all improved, reflecting this trend as well. With a Net Cash for Net Debt/Equity, this shows that the firm is well leveraged, and won’t have much interest or debt payment obligations in the future.
Four-Pronged Strategy
The firm has developed these strategies which include development of new concepts, overseas expansion, cost and quality control and network expansion and consolidation.
This to me seems like the right moves to make. Developing new concepts helps to diversify revenue streams, which reduces risk and also introduce fresh concepts to the public.
With the limited Singapore market, expanding overseas is also quite necessary to tap on growing middle class bracket in Asia.
Network expansion and consolidation might help to reduce costs due to economies of scale too.
With high fixed costs like rent and staff costs, increases in revenue will more than proportionately increase profits, so expansion is quite crucial.
Valuation
When compared with similar F&B companies in Singapore, Japan Food Holdings seems undervalued based on P/E and P/B ratio, since these ratios are lower than both their respective averages and medians.
I believe this could have occured because of a decrease in share price over the past few years from earnings having decreased . However, despite Earning Per Share increasing slightly recently, and share prices not increasing that much, this could lead to the lower P/E ratio.
Compared with other business models, I do believe that their brands such as Ajisen Ramen are quite defensible as well. With growing revenue and a chance to operate overseas, their shares might be undervalued.