Aging ?

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Old Chang Kee was incorporated in Dec-2004 and listed in SGX in Jan-2008 @ $0.139.

The company is in the business of manufacturing and sale of convenient food. Locally well known curry puff is the firm signature product. 

Majority of sales is in Singapore with small presence in Malaysia, London and Australia. OCK exit the China market in 2012. 

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Financial

Fiscal year reporting was changed from YE December to YE March in 2012. Sales in FY07 was $40.5M.

Sales peaked in FYMar19 and started to taper-off from FYMar20. The marginal sales decline was unlikely due to COVID-19.

Sales did eventually plunged in FYMar21 due to the pandemic.

Adapting to a changing environment, OCK is now providing frozen meal and snacks delivery to home.

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Gross margin trended up from 60.1% in FY12 to 65.6% in FY21. This was due to large scale food catering to dormitories and scale.

However, expenses increased at a higher rate, squeezing operating margin and net profit. 

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Net profit was up significantly in FY21 due mostly to government grants.

Absent grants, net profit should be less than $3M for the year.

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Risk

Balance sheet is healthy with reducing debt. Current ratio at 1.3 had been reducing since FY16 when the ratio was above 2.0

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Opinion

At the present moment, there are no known strategic action to boost top line growth. High margin for signature product is likely to continue facing emerging competitors.

The divergence between gross margin and expense in FY21 appear promising. It is still uncertain if this is a one-off or sustainable. 

Net profit appear to be steadily declining and turning volatile between FY17 to FY21. 

Dividends have declined since peaking in FY16.

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Most companies have deferred to COVID-19 as reason for weak business. While true to some extend; there is also the danger of declining competitive advantage being masked from managers perception of their operating environment.