Tung Lok Restaurants (2000) Ltd: An In-depth Financial Analysis – Net Loss of S\$2.6 million

Business Description

Tung Lok Restaurants (2000) Ltd is a limited liability company incorporated in Singapore and listed on the Catalist Board of the Singapore Exchange Securities Trading Limited. The company’s core business operations are:

• Restaurant operations
• Catering services
• Central kitchen support function
• Investment holding

Geographically, the company primarily operates within Singapore.

Industry Position

Tung Lok Restaurants operates within the highly competitive food and beverage (F&B) industry in Singapore. The company faces significant competition from both local players and international chains. The market environment is challenging due to economic uncertainties and the entry of new competitors.

Revenue Streams and Customer Base

The company’s revenue streams include sales of food and beverages, service charges, and management fees. Its customer base spans across individual consumers dining in its restaurants and clients availing catering services. Tung Lok also engages in sales of Original Equipment Manufacturer (OEM) products through its central kitchen function.

Financial Statements Analysis

Income Statement

For the six months ended 30 September 2024, Tung Lok reported a revenue decline of 9.5% to S\$38.5 million compared to the same period in 2023. Gross profit decreased by 9.8%, leading to a net loss of S\$2.6 million, a significant decline from a profit of S\$0.3 million in the previous year. The gross profit margin slightly decreased to 70.3% from 70.5% in HY24 [[3]].

Balance Sheet

As of 30 September 2024, the company’s total assets stood at S\$49.8 million, down from S\$55.7 million as of 31 March 2024. Total liabilities decreased to S\$37.4 million from S\$40.0 million over the same period. The net asset value per share dropped to 4.60 Singapore cents from 5.79 Singapore cents as at 31 March 2024 [[4]].

Cash Flow Statement

The company experienced a net decrease in cash and bank balances of S\$3.4 million, ending at S\$12.6 million as of 30 September 2024. Operational cash flows generated a net inflow of S\$1.9 million, while investing and financing activities resulted in net outflows of S\$0.5 million and S\$4.8 million, respectively [[6]].

Key Findings

• Net loss of S\$2.6 million compared to a profit of S\$0.3 million in the previous year [[3]].
• Revenue decreased by 9.5% due to lower contributions from closed outlets, catering business, and existing outlets [[16]].
• Gross profit margin slightly declined to 70.3% due to higher food raw material costs [[16]].
• Administrative expenses increased by 1.8% due to salary adjustments [[16]].
• Cash and bank balances decreased significantly, impacting liquidity [[17]].

Dividend

No dividend has been declared or recommended for HY25 to maintain sufficient liquidity for working capital requirements [[19]].

Special Actions

The company is implementing digital initiatives to enhance the dining experience and improve operational efficiencies amid the challenging economic environment [[19]].

Investment Recommendations

For Current Shareholders

Given the current financial performance and the challenging market environment, it is recommended to hold the stock if you are already invested. The company’s efforts to enhance operational efficiencies and its cautious optimism for the second half of the financial year may provide future growth opportunities.

For Potential Investors

If you are not currently holding this stock, it may be prudent to observe the company’s performance in the coming quarters before making an investment decision. The current net loss and revenue decline present significant risks.

Disclaimer

This analysis is based on the financial report provided and is intended for informational purposes only. Investors should conduct their own research or consult with a financial advisor before making any investment decisions.