Hungry for Returns? Check Out These 3 Restaurant Stocks

There’s nothing like food to whet the appetite for investor returns. Food and beverage stocks are some of the easiest businesses to understand as they involve brands and products that people consume on a daily or weekly basis.

However, not all food and beverage companies enjoy healthy returns, as barriers to entry are low and the nature of the industry makes it extremely fragmented with a large variety of players.

Drilling down into sub-segments, the restaurant segment caught my eye, partly because restaurants are a tangible and visible aspect of food and these are also places where families and couples share wonderful interactions and memories. Here are three Hong Kong restaurant stocks that investors can consider adding to their portfolios.

1. Ajisen (China)

Ajisen (China) Holdings Ltd (SEHK: 538) operates a total of 770 Ajisen Ramen fast-casual dining restaurants in China and Hong Kong as of 30 June 2019. The group is a franchisee of Shigemutsu Industry Co Ltd (a Japanese company which owns the Ajisen Ramen brand) and has exclusive and perpetual rights to operate Japanese-style ramen chains in Hong Kong, China and Macau.

For H1 2019, revenue increased by 6% year-on-year to RMB 1.2 billion (US$167.8 million). However, operating profit plunged by 48% year-on-year to RMB 63 million on increased staff costs and significantly higher depreciation. Profit attributable to shareholders decreased by 28.6% year-on-year to RMB 87 million.

The group declared an interim dividend of HK 2.2 cents and a special dividend of HK 2.5 cents for a total dividend of HK 4.7 cents. At a share price of HK$2.16 (as of the time of writing), the shares were offering a dividend yield of around 2.2%.

2. Café de Coral

Cafe de Coral Holdings Limited (SEHK: 341) is one of Asia’s largest publicly-listed restaurant and catering groups. The group operates quick-service restaurants, casual dining chains and institutional catering with over 450 outlets in Hong Kong and China. Café de Coral was incorporated in 1968 and currently employs over 18,000 staff.

For FY 2019 earnings (fiscal year ended 31 March 2019), revenue inched up 0.8% year-on-year to HK$8.5 billion (US$1.1 billion), but profit attributable to shareholders soared 28.9% year-on-year to HK$590 million.

A final dividend of HK 65 cents was declared, slightly higher than the previous year’s HK 63 cents. Along with last year’s interim dividend of HK 19 cents, the total trailing 12-month dividend was HK 84 cents. At a share price of HK$21.60 (as of the time of writing), this represents a trailing yield of around 3.9%.

3. Taste Gourmet Group

Taste Gourmet Group Ltd (SEHK: 8371) is a restaurant group that serves Vietnamese, Japanese, Chinese and Western cuisines under 14 brands such as Dab-Pa Peking, Say Cheese and Rakuraku Ramen. The group has a total of 27 restaurants in prime areas and the Central district in Hong Kong.

For the group’s latest full-year earnings (for fiscal year ended 31 March 2019), revenue growth was strong, rising 43% year-on-year to HK$307.7 million, while profit attributable to shareholders surged 50.9% year-on-year to HK$27.3 million.

Notably, the number of customers visiting the group’s restaurants grew by 46.3% year-on-year to over 2.1 million. A final dividend of HK 1.5 cents was declared. Together with the interim dividend of HK 1.5 cents, the total dividend for the year was HK 3.0 cents. At its share price of HK$0.82 (as of the time of writing), this represented a dividend yield of 3.7%.



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