Company in focus - Select Group

Select group is a leading food service provider in Singapore. They started out with catering as their main business and branching out over the years to include restaurants, fast food chains, desert chains, F&B management services, event catering etc.

Below shows the select group of companies under them:

This company caught my attention as their financials reflect positively on their management capabilities. Some of their brands are quite successful and i'll describe my experiences of what i think of them.

Firstly, Texas Chicken is a well known brand in Singapore now. When they first started out, i was sceptical that they could survive with KFC and Popeyes already in Singapore. Later on, i've been hearing my colleagues, friends and relatives talk about texas chicken. The comments were good and most of them were saying texas chicken sells better chicken than KFC. It was then i decided to try it out and it was unbelievable. Their chicken were different from KFC indeed. More juicy inside and even their breast meat was not so dry. Even my foreigner friends were commenting positively on Texas chicken too. Indeed if you look into their financials, Texas chicken has seen an increase in revenue from 8.131 Million in 2011 to 11.094 Million in 2012.

Secondly, they have Stamford as their catering business. This caterer name i've seen a few times before and i realised my company has been engaging their services for many of our events. I remembered during my army days, SAF also engages Stamford catering. With big institutions as their clients, their business is relatively stable.

Thirdly, they have this restaurant called Peach Garden. This is the restaurant that contributes most to their revenues. Peach Garden made up 30% of their revenue in 2012.  I've not been to this restaurant before but have heard people saying about it. They specialise in Chinese fine dining.

Now moving on to their financials.

Income statement
Currency in Millions in SGD	2009	2010	2011	2012
Revenue	61.6	75.5	101.5	116
Net Income	0.3	-1.7	3.2	4.2

Balance Sheet
Cash and Equivalents	8.1	6.7	6.6	12.5
Long Term Debt	2.4	3.2	0.6	1.6

Cash flow
Cash from operations	4.2	6.5	8.8	17.3
Capital Expenditure	-5.9	-9.8	-4.4	-7.1

Revenue and Income has been increasing consistently for the past 4 years. Their balance sheet is healthy with strong cash and low debt. Cash flow has been increasing consistently also. If you look at some of the financial ratios, it is quite promising for the company.

Return on Equity: 25.03%

Return on Assets: 6.28%

PER is at 13.4x which is lower compared to similar companies like breadtalk (PER 21.5x) and Old Chang Kee (PER 15.4x)

Dividend yield is fairly attractive at 6.41% at the current price of 0.39. 

I have bought some shares of this company as of this week. I think their management have been actively expanding the business and it is good for the group. They are also planning to introduce two new culinary offers this year and expand each of their businesses to 20 or more outlets. 

Its share price has risen from 0.35 to the highest of 0.40 and closing at 0.39 today. This is about 10% increase this week. 

For more information on thier business, you can visit their website: www.select.com.sg

*Please read disclaimer at the bottom of this blog*

*All financial information adapted from investing.businessweek.com and Select group annual report 2012. 

*Picture adapted from Select Group corporate website.