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Thursday, May 17, 2012



Jubilant Foodworks

 Jubilant Foodworks 

Daily News Roundup - May 17 2012

Piramal Healthcare Ltd is set to acquire Decision Resources Group - a US-based company in the healthcare information segment, for a consideration of approximately US$635mn (BS) Reliance Industries has reported that natural gas production from its eastern offshore KG-D6 fields has dropped to about 32.66mscmpd. (BL) Infosys termed the growth target given by industry body Nasscom (11-14%) for the year as ‘ambitious’, given the uncertain domestic and global macro-economic scenario. (ET) Welspun Group has won a 125-MW solar photovoltaic project in Madhya Pradesh. (BS)

Sensex sinks on Rupee weakness, global selloff

After snapping a five-day losing streak in the previous trading session, the Indian markets on Wednesday resumed their fall. The drop was quite sharp amid no sign of resolution to the Greek political crisis, which has triggering a global sell off. Asian stock indices finished sharply lower, as the undertone continued to be shaky amid concerns that political instability in Greece could lead to fresh economic turmoil in the debt-stricken eurozone nation. Fears are also mounting that Greece may eventually have to leave the currency bloc, further denting the prospects for global economic growth. European stock indices too extended losses today on mounting worries about a possible exit from the euro currency bloc. The FTSE index in the UK was down 1%, while the DAX index in Germany slipped 0.7%. The CAC index in France managed to rebound and was trading slightly higher. The Dow industrials ended near a four-month-low on Tuesday as investors continue to shun risky assets and are instead taking a refuge in the US dollar and treasuries.

Thinking austerity

The serenity of mind, gentleness, silence, self-restraint, and the purity of mind are called the austerity of thought." - Bhagavad Gita. The all-pervasive message at the moment is: fix Greece and the world will be a better place to live. News of fresh election in Greece has raised worries of its exit from the euro and broader financial meltdown. Already there are reports of run on bank deposits. US stocks declined as worries over Greece overshadowed encouraging economic data. Fed policy makers are somewhat worried about US outlook, have hinted at further easing. European stocks closed mostly in red. Asian markets are flat to indecisive.

Markets may see a slightly higher start

The Indian markets are expected to begin the session on a positive note tracking supportive Asian markets. SGX Nifty is trading 19.50 points higher. Events for the day: Results: Bajaj Auto, Bajaj Holdings & Investment, Jaypee Infratech, Jaiprakash Power Ventures, United Breweries. Headlines for the day: Federal Bank launches debit cards for HNIs. SpiceJet may deploy Q400 planes in north India. 3 striking AI pilots resume duty, stir continues on day 9.

Speciality Restaurants IPO Analysis

Speciality Restaurants, promoted by Mr. Anjan Chtterjee and Suchanda Chatterjee, is a fine dining operator with 49 Company owned and operated restaurants, 20 Franchisee and 13 confectionary outlets spread across 20 cities in India and one in Bangladesh. The promoters had launched the network in 1992 under the name Only Fish (later renamed to Oh! Calcutta). First Mainland China restaurant was launched in 1994. Most of tits restaurants located in Metros and Tier 1 cities and it continues to expand its operations in these places and opportunistically in Tier II cities. In future it seeks to expand mainly through ownership and opportunistically through franchising on a Franchisee Owned Company Operated (FOCO) model across India as well as certain international destinations. The FOCO model allows it to enter and operate in markets, which it may not otherwise exploit particularly in to the Tier II cities. Also, the majority of its restaurants are located in western India, which has the highest proportion of people dining out regularly. The Company's flagship brand Mainland China serves Chinese cuisine in a standalone fine dining setting. Chinese is one of most popular foreign cuisines in India. The Company has 36 Mainland China restaurants across India as well as one in Bangladesh. Notably, the revenues contribution from Mainland China is steadily improving from 53.27% in FY'09 to 61.23% in FY'11. It believes that maintaining and enhancing the Mainland China brand is important for maintaining competitive advantage. Also, the brand Oh! Calcutta encompassed seven restaurants across India as well one in Bangladesh. This brand features a range of cuisines from the east India city of kolkata, including the Bengali, Nawabi, British and continental cuisines served in a fine dining setting. The other restaurant brands it owns are Sigree, Flame & Grill, Haka, Just Biryani, KIBBEH, Kix, Machaan, Shack as well the confectionary brand Sweet Bengal. It has consistently improved its revenues and earnings with expanding network of restaurants. The Company increased owned and operated 30 restaurants as on 31st March 2008 to 45 as of 31st March 2011 and further to 49 as of February 29th 2012. Also, the franchise based restaurants from one as of 31st March 2008 increased to 18 as of 31st March 2011 and further to 20 as of February 29th 2011. The revenues increased by 34% to Rs 173.16 crore in FY'11. The Revenue split across the brands in FY'11 was: Mainland China (60.3%) followed by the Oh! Calcutta (12.3%), Sigree (9.5%), Flame & Gril (5.1%), Machaan (4.1%), Haka (3.8%) and others (4.9%). The restaurants in western India has contributed 39% of revenues in FY'11 and 41% of revenues for the nine months ended December 2011. Also, number of guests served were at 2.59 million for FY'11 and 2.09 million in nine months ended December 2011 with an average 7313 and 8127 guests per day respectively. The major portion of proceeds (around Rs 131.60 crore) is proposed to be utilized for opening of 45 New Restaurants for next three fiscal years FY'13, FY'14 and FY'15. Of this, Rs 92.27 crore is planned to be spent towards interior and equipment costs. In addition, Rs 15.1 crore is proposed to be utilised for the development of food plaza in Rajarhat, kolkata, West Bengal. Going forward, The company plans to maintain a tight basket of brands with a focus on Mainland China brand, while targeting a few new market segments. It may introduce new products to adapt to dining trends, shifts in guest spending and tastes and nutrition preferences. Strengths: It has well recognized brands Mainland China and Oh! Calcutta brands with experience of over 17 years. Diversified business model with Mainland China (offers authentic Chinese cuisine), Oh! Calcutta (diverse traditional cuisines), Sigree (authentic Indian cuisine), Flames&Grill (serves Kebabs), Machaan (traditional Indian dishes & children dishes) etc. "Asset light model" as all the restaurant properties are leased. The strong process established over the past 12 years for the quality control, brand standards, operations monitoring and food and service audits. Presence in key strategic locations Weaknesses: The fine dining sector of the restaurant industry is highly fragmented and competitive. The slowdown in the economy could impact the business. Rising property rentals Valuation: Over the last three years (FY08-11), the company's revenues have increased at a CAGR of 27% and reported net profit at a CAGR of 47%. The revenues increased by 34% to Rs 173.16 crore in FY'11. OPM increased to 22% (improved by 150 bps YoY). Accordingly there was robust 44% growth in operating profit to Rs 38.15 crore. There was sharp rise in other income (100%) and marginal decline in interest cost (3%), partly offset by the increase in depreciation (25%). Eventually, PBT grew by 69% to Rs 24.08 crore. After the rise in effective tax rate by 130 bps to 33.5%, there was 66% growth in PAT to Rs 16.02 crore. After adjusting for prior period items, adjusted PAT increased 40% to Rs 15.63 crore. For the nine months ended December 2011, Revenues stood at Rs 149.70 crore with OPM of 20.9%, PAT was Rs 15.02 crore for the same period. At the issue price of Rs 146-155, the P/E works out 43-45 times the FY'11 EPS Rs 3.4 (on post-IPO equity). There is no comparable listed player focused on fine dining. However fine dining is part of Food Service sector of which Jubilant Foodworks is a listed player trading at FY 2011 P/E of 103. Jubilant Food's brand, business model and prospects are more robust than that of Speciality Restaurants. Due to rising urbanization and nuclear families, growing young population, growing number of working women, increasing preference for dining out/ eating outside food and changing food habits away from traditional food, the Food service sector offers excellent growth potential. But there is scarcity of listed stocks in this sector. Hence valuations of such stocks will remain high.

Market may open higher on firm Asian stocks

The market may edge higher in early trade tracking mostly higher Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 33 points at the opening bell. Bajaj Auto announces FY 2012 results today, 17 May 2012. Marico said after market hours on Wednesday that it has allotted a total of 2.94 crore equity shares at Rs 170 per share on preferential basis to Indivest Pte., an affiliate of Government of Singapore Investment Corporation, and Baring India Private Equity Fund III Listed Investments. Indivest Pte was allotted 2.2 crore shares and Baring India Private Equity Fund III Listed Investments was allotted 73.52 lakh shares.

Tulip Telecom

 Tulip Telecom

SGX Nifty Live Update - May 17 2012

4874.25 +31.00 (+0.64%)