SINGAPORE (Sept 10): Koufu, the manager of food courts and coffeeshops, is building a larger central kitchen and planning to expand selectively in Singapore and overseas.

Currently, Koufu operates 48 food courts and 80 food and beverage (F&B) stalls across Singapore and Macau. It also runs 14 coffeeshops, F&B kiosks, 11 quick-service restaurants (QSR), three full-service restaurants, a hawker centre and a commercial mall in Singapore.

Koufu says its food court expansion will focus on hospitals, commercial malls, tertiary educational institutions and new housing estates in Singapore and Macau. The group is also looking to partner companies to bring its F&B retail brands such as R&B and Supertea to Malaysia and Indonesia.

Construction of the central kitchen is expected to begin in 4Q and targeted to be completed in 2H20. The integrated facility will have a gross floor area of 20,000 sqm, five times larger than the existing central kitchen. It will house a larger central kitchen and a centralised dishwashing facility to serve its food courts located in the Northern and Western regions. The new facility should lead to greater cost savings through the central procurement and preparation of food. This will reduce its manpower needs and improve space utilisation in the F&B outlets.

This facility is also expected to generate rental income for Koufu, as it lets out a few floors to its food court stall tenants as mini-central kitchens. This allows the stall operators to increase production and potentially open more stalls at Koufu food courts. Management believes the potential rental income generated could offset the depreciation cost of the new facility.

Koufu has a dividend recommendation of at least 50% of net profit after tax generated in FY18 and FY19. In a non-rated report on Monday, RHB Research lead analyst Juliana Cai says, “We believe this should translate to a dividend yield of around 3-3.5%. This is backed by a net cash balance of $40 million, consistent and positive generation of cash flow and the resilient nature of the business against challenging economic cycles.”

At its last trading price of 65 cents, Koufu is trading at 11.7 times historical earnings or at a discount to the 23.5 times peer average.

“We deemed this attractive, given its superior net margin and higher dividend yield,” says Cai.