Chew’s Group Limited (5SY.SI) is a leading producer of fresh and designer eggs in Singapore. The company supplies about 8% of Singapore’s eggs to wholesalers, F&B outlets, supermarkets and hypermarkets under the brand name “Chew’s”. 93% of the revenues are generated in Singapore. [mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”]However, the company is established a steady growing supply chain in Hong Kong too. Chew’s Group produces also liquid eggs, trades spent grains, and has recently set up a factory for chicken soup to expand its product range. One-third of the revenues are generated from its largest customer.
Chew’s Group has recently sold its current production site following a redevelopment plan for the area by the Singaporean government. In May 2019 the company will relocate to a new 20 hectares site with an integrated farming concept, advanced equipment and with ample capacity for future expansion. The company is then targeting a daily production of 580,000 eggs, an increase of 70%.
Chew’s Group started in 1975 as a breeder farm, selling day-old chicks to broiler and layer farms. The company was incorporated in 2010 and is headquartered in Singapore. The company is listed on Singapore’s Stock Exchange since February 2011. The share can also be traded in Germany. 72% of the shares are held by Fenghe Investment Holding Pte Ltd and the Chew family. The balance is owned by the public.
With a workforce of 114 employees, Chew’s Group reported revenues of 17m SGD (12m USD) and a profit before tax of 2m SGD (1.5m USD) for the first six months of its fiscal year 2017. This is an increase of 3% and 63% respectively compared to the same period a year ago. In 2016, revenues were down 5% while profits were up 1150% compared to the year before.
The strong growth in profits is due to the disposal of land use rights, property, plant, and equipment in preparation for the relocation of its production facility in 2019. Without these non-recurring items of around 28m SGD, profits would have been down by 5% in 2016. The operating margin of 94% is above the industry average. After the land disposal Chew’s Group is well-capitalized with cash reserves of 44m SGD (32m USD) at the end of March 2017. The company shows a solid balance sheet with an equity ratio of 80% and a gearing, defined here as total liabilities to total equity, of only 25%.
Chew’s Group shares are in an uptrend since September 2015 and gained 124% in value since, 47% alone this year. The company is currently priced at only one time earnings compared to 41 times among its sector peers. Without non-recurring effect, the p/e ratio would be around 8. The shares trade below book value and at one time cash flow only. The last dividend payment yielded 1%.
We see good chances that profits will strongly grow after the relocation of the plant and expect the share price to increase about 40 to 50% in the next 12 months.
AIS Rating: ★★★★☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 H1 only |
|
|---|---|---|---|---|---|---|---|
| EPS (SGDcents) | 1.6 | 2.5 | 2.7 | 2.4 | 2.6 | 33.0 | 2.0 |
| Change | -62% | 54% | 10% | -13% | 11% | 1156% | 54% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 1.4 | 41 | 0.8 | 0.9 | 80% | 73% | 25% | 1% |
* Equity / Total Assets, ** Total Liabilities / Equity
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