facebook(Stocks Discussion) SGX: Sakae Holdings Ltd (SGX: 5DO)? - Seedly



16 May 2019



(Stocks Discussion) SGX: Sakae Holdings Ltd (SGX: 5DO)?

Discuss anything about share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment!


Discussion (1)

What are your thoughts?

Isaac Chan

Isaac Chan

06 May 2019

Level 11ยทBusiness at NUS

TL;DR Financially, the business seems to be doing worse year on year. The company also has quite some debt to pay off, and Sakae Sushi seems to have lost its competitive advantage and appeal to diners.

Source: HungryGoWhere

Business Profile

Source: Sakae Holdings Annual Report FY2018

Sakae Holdings is most probably well-known for its Sakae Sushi brand. Currently, they also have Sakae Delivery, Sakae Teppanyaki, Sakae Shop, Hei Sushi, Hei Delivery, Senjyu, Nouvelle, and Events & Catering among other brands. They aim to promote healthy dining, food safety, and quality, and sustainable growth, with over 100 outlets across Singapore, China, Indonesia, Malaysia, the Philippines, Vietnam, and Chile.

SWOT Analysis

Source: Marketing Interactive

Strength: The business has a strong brand name among Singaporean, and could be associated with more healthy dining. The diversification of revenue streams may also help to reduce concentration risk. Moreover, the business does possess a competitive advantage, in that sushi is often a food more unique compared to other F&B chains.

Source: Sakae Holdings Annual Report FY2018

Weakness: Demand for their products seems to be dropping consistently over the years. Their technology ventures may also fail without proper expertise. Additionally, sushi is a very expensive dish to prepare by itself, due to high ingredients and preparation costs.

Source: HungryGoWhere

Opportunities: Management can tap on consumer's brand consciousness and the increase in healthy dining. They could reduce prices to make the food more affordable while trying to promote healthy eating to a large target audience.

Threats: The F&B space has become increasingly competitive with an increase in the number of outlets. Moreover, the F&B Japanese segment is also quite competitive as well, with this specific market being very mature.


Source: Sakae Holdings Annual Report FY2018


On paper, revenue seemed to increase in revenue was due to the additional 6 months of revenue due to the change in the financial year. For FY2018, revenue was 94m compared to 86m for FY2016. However, the fact that revenue only increased by 9% with an additional 6 months is quite abysmal. If we compare a full calendar year, revenue was a decrease of more than 25%. This falls in line with how revenue has been falling over the years. Their foray into Fintech and cybersecurity, which I find quite comical, is probably an indication of how business isn't doing well for them.


The company's net profit was negative for the latest financial year at 5mn leaving the business with a net profit margin of about 5.6 %. This was due to very high operating, administrative costs and costs of sales were higher than revenue itself. The business, though, does have some other income that generated about $22m, which includes other income like rent.

Balance Sheet

The company has a very poor balance sheet as well. For example, the current ratio is around 0.35, which means that short-term liquidity or the ability to meet financial obligations is very weak. Moreover, the business holds a lot of receivables and prepayments, and not much cash.

With about $55m in debt, their Debt/Equity ratio is about 1.3. Its interest coverage ratio (EBIT/Interest Expense) is about 3.5X, while Net Debt/EBIT ratio is about 7 times negative earnings before interest and tax. Needless to say, the company is gonna face some trouble paying off their debts.


What strikes me is how capital intensive the business is, with depreciation almost the size as profit before tax. Additionally, there was a $5.7mn write-down of inventory due to obsolescence. This could be a sign that inventory management has been poor, or that management had not foreseen the decrease in demand and an overbought inventory which spoilt. Additionally, because the company spends so much on upfront inventory ($5mn), cash flows were weaker, so cash flow from operating activities was negative.

Cash flows from investing activities were also negative, due to $4.5mn spent on plant, property, and equipment and acquisition of subsidiaries.

These poor cashflows reveal why the company has to take on debt to finance its operations. Thankfully, the company doesn't pay dividends.



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