CFA Society Singapore
SINGAPORE (Sept 24): Founded in 1900, Yeo Hiap Seng has grown from a soy sauce manufacturer to the Asia food and beverage (F&B) player it is today.
YHS is well known for its brand of Asian beverages like soybean drink and chrysanthemum tea and canned food products including chicken curry and sardines and baked beans.
YHS also exports to the US and Europe. In 2003, YHS unveiled a new range of “Y-Generation” drinks with creative flavours, packaging and logo to target younger consumers.
Since FY14, YHS has focused on expanding and rejuvenating its core consumer F&B business.
In FY17, company sold its investment in delisted Super Group. In March, YHS entered into a joint venture with HK-listed China Huiyuan Juice Group to develop, manufacture, sell and distribute fruit and vegetable juices targeting the Malaysian market.
In 1H18, YHS’s revenue rose 8.8% y-o-y, while net profit increased 42.3% y-o-y boosted by a $2.9 million gain from the sale of property, plant and equipment and $3.6 million in fair value gains on financial assets.
Although YHS enjoyed y-o-y higher sales in Malaysia, Singapore, Cambodia and China, gross margin was flattish y-o-y at 32.5%. No interim dividend was declared.
In a recent unrated report, CGS-CIMB Securities’ analyst William Tng says for the next 12 months, YHS expects F&B profit margins to remain under pressure from the weak consumption outlook for the markets that the group operates in.
And although the company expects its selling prices to stay competitive, Tng says likely fluctuations in raw material prices and foreign exchange rates could have negative impact on the group’s earnings in the near future.
Still. YHS plans to continue investing in rejuvenating its brand and launch new products, develop its agency business and improve operating efficiencies, says Tng.
YHS trades at a 3.7 times FY17 earnings, 0.86 times book value against 23.4% ROE.
In the past five years, YHS has been in a net cash position. At end June, YHS had net cash of $278 million or 49% of its market cap as at Sept 20.
Although it does not have an official dividend policy, YHS has paid dividends in the past five years.
Year to date, shares in YHS are down 18.7% to $1.00.