I like sashimi. Sakae is an affordable Japanese restuarant to go to. It has become a name that is synonomous with Jap food and sushi. Let’s take a look how their stocks fare.
The current price of Sakae Holdings share is S$0.200. In 2009, the earnings per share is S$0.023. This gives a P/E ratio of less than 10, 8.7 to be exact. Pretty attractive huh?
Next we’ll look at the debt to asset ratio. The total debts in 2009 is S$26.769M while the total assets is S$47.024M. Hence, the debt to asset ratio is about 57%. Not bad either.
How about the consistency of the profits over the past 5 years? See the chart below:
If you noticed, 2008 is a weird year. Sakae actually went into negative. The reason? Building a new headquarters at Paya Lebar area. Here is the notes from the annual report:
“a loan of $5,190,000 (2007: $Nil). The loan was raised during the year to finance the construction of the new operational headquarters at Tai Seng Drive, which is pledged to secure for the loan. The loan carries interest at 1.25% per annum over the bank’s prevailing Cost of Funds or variation at the Bank’s discretion. Repayment commences throughout the period of the construction stage till issuance of Temporary Occupation Permit (“TOP”) or up to 24 months from date of first drawdown, whichever is earlier, interest is to be serviced monthly commencing 1 month from date of first drawdown (“interest servicing period). Thereafter, the loan shall be converted into a 10 year term loan subject to bank’s prevailing rate and terms and conditions mutually agreed. The 10 year term loan shall be paid over 120 monthly instalments. The first instalment comprising principal and interest shall commence 1 month form conversion from the interest sevicing period or 1 month after the issuance of TOP or September 30, 2010, whichever is earliest. As a consequence of the Group’s financial performance during the year, there is a breach of financial covenants relating to the construction loan and no waiver or rectification of the breach has been obtained before the year end. Accordingly, the carrying amount of the loan that has become repayable on demand, is classified as a current liability as at year end. Subsequent to the year end and before this set of financial statements are authorised for issue, management has obtained a temporary waiver from the bank regarding the breach until December 31, 2009.”
Would a brand new headquarters bring in more revenue or profits to the company? I am not that confident. We all know that 2008 is the crisis year. Maybe it was the cheapest time to build an office.
Have Sakae repay the loan? The answer is no. Based on the 2009 report, the non-current liabilities in bank loans have increased from 0 (2008) to S$8.343M. The loan for the building was simply converted to a 10 year loan after TOP in May 2009.
Moreover, the net cash flow from operating activities have not improved after the economic crisis in 2008. S$7.652M (2006) to S$8.344M (2007) to S$1.852M (2008) to S$2.876 (2009).
Is it a good buy? I am not comfortable with the earnings from it’s operating business and I feel that the headquarters may not be crucial to create a positive boost to the company’s earnings.
Disclaimer: This is not investment advice. I am just sharing my analysis.
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{ 5 comments… read them below or add one }
thanks Alvin for sharing your analysis.
In my opinion, Sakae has NOTHING unique. There are many Japanese sushi restaurants and I’ve certainly been to several that are better and not exactly more expensive than Sakae.
It has a very weak brand compared to eg. Breadtalk.
Cheers!
Dennis Ng
thanks Alvin for sharing your analysis.
In my opinion, Sakae has NOTHING unique. There are many Japanese sushi restaurants and I’ve certainly been to several that are better and not exactly more expensive than Sakae.
It has a very weak brand compared to eg. Breadtalk.
Cheers!
Dennis Ng
Quite true. Ichiban Boshi serves better sashimi and not exactly more expensive
Quite true. Ichiban Boshi serves better sashimi and not exactly more expensive
The Tai Seng HQ is meant to be a central kitchen/ call centre / logistics support. The amount invested is 20 mil. Its currently valued at 70 mil. They will have some lease income from the building..
In addition, they will also gain quite substantially from the North Bridge complex.
BT 25 Jan 2010
DTZ has announced that the freehold North Bridge Commercial Complex, located along North Bridge Road, is up for sale, with an expected price tag of S$110 million to S$115 million.
Zoned for commercial use, the site has a total area of 1,079.1 sq m and a maximum gross floor area (GFA) of 4,532.2 sq m, with a gross plot ratio of 4.2.
Based on sale price expectations, this translates into a psf ppr cost of S$2,225 to S$2,357.
The plot has a buildable height of up to six storeys, said DTZ. It currently houses a six-storey commercial block with an existing GFA of 6,188.67 sq m.
Shaun Poh, Senior Director for Investment Advisory Services and Auction at DTZ, said, “There has been no similar property offering in the vicinity recently and we expect the property to attract keen interest from investors and developers.”
With the plot’s central location, along with its prominent frontage and proximity to the Bugis and City Hall MRT stations, the property has the potential to be restored into a boutique office, said Mr. Poh, adding that it can also be converted into a retail development.
“Shop units at The Bencoolen have recently changed hands at S$3,500 to S$5,300 psf and at Sim Lim Square up to S$9,000 psf,” he said. Other possible development options for the site include a hotel, which is subject to planning approval, he added.
The tender for the site will close on March 3.
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