Saturday, August 12, 2017

Can Katrina Group lives up to its expectation?

Just to share a brief background on Katrina Group. There are total of 9 brands under Katrina Group and 4 of them are Halal. All of these 9 brands are available for online food ordering & delivery services.

Katrina Group Ltd was listed on Catalist of the Singapore Exchange Securities Trading Limited on 25 July 2016. The price has surged to 38.5 cents from IPO price of 21cents on the day of debut. However, it has started to go down hill since IPO to the current price of 22.5 cents on 11-Aug-17.
Let take a look at Katrina performance over these few years.

The net profit in 2016 was affected due to IPO expenses of S$0.9 million. Overall, Katrina seem to be doing quite well in term of growing revenue and gross profit. Let move to the recent finance report for 1H2017.

There is combined factors of drop in term of gross profit and increase in operating expenses which lead to a substantial drop in net profit. In the report, they mentioned that the drop is due to a few factors:
  • Closure of some outlets in china
  • Increase costs associated with setting new outlets
  • Additional recurring statutory filing requirements and maintenance of its new Enterprise Resource Planning system
The cash flow from operation activities is a bit alarming as they need to generate sufficient money for investing and financing activities.


However, their current liabilities has also decrease by S$2.6 millions and non-current liabilities remain around S$1.1 million which is a good sign. Overall, I am a bit concern on how Katrina is managing their expenditure while expanding.

Using Swot analysis on Katrina

Strength
-Online catering/home delivery service
The revenue for this service is S$2.8 millions has exceed total revenue of S$2.5 millions for FY2016. This service will expect to do well especially change in the consumer habits.


Weakness
-Poor Branding
They have 9 branding under their companies but most of them do not strike a chord with Singaporean. They really need to work on their branding through marketing strategy.  
-Shortage and high cost of manpower
They have to make use of technology to overcome shortage and high cost of manpower.
-Change in consumer demand
As the world is changing fast, the consumer demand also changes and it is important to take note of this.
-Majority of the income comes from Singapore which would be affected if there is slowdown in Singapore. 


Opportunities 
-Expansion Growth Plan in PRC and Hong Kong
Through acquisitions, joint ventures, franchising agreements or strategic alliance. 
One of the most recent partnership is with Hong Kong listed Ajisen group to grow "So Pho"
-Halal Market
Halal food industry is growing at rapid rate and they have 4 Halal brands which can be position to capture the market share. Furthermore, Muslim population is the second highest population after Christianity and they are growing at a very fast rate. 
There is an article from business time on "Singapore companies well-placed to tap China's halal market." The article mentioned China's halal market is valued at US$21 billion and is one of the fastest-growing in the world but it lacks national standards & legislative support as its certification centres are only regional. 

Threats
-Change in oversea regulation
Due to expansion oversea, any change in oversea regulation might also affected the company.
-Currency exchange
As they are expanding oversea, there might be some Forex exchange losses.
-Competition from other F&B companies
Managing competition from other F&B companies and they will need to continue innovate to capture and maintain their customers.

I am a bit concern over the recent financial report for Katrina holding. Overall, Katrina has to work on their branding and management of their expenditure while carry on their expansion plan. However, it is not a call to buy or sell, please do your own due diligent. I will continue to share more information along the way. If you have any idea on how to help me on my writing, feel free to voice out. Thanks!