During the past 12 months, the Group had closed two stores (at Golden Shoe Complex and Century Square) and opened two new stores (at Tampines Hub and Smart Energy Serangoon Petrol), bringing total store count in Singapore unchanged at 87.
Meanwhile, we expect 3 net new stores in 3Q18. The Group has opened four new stores (at Wisma Atria, Changi Airport Terminal 4, Ang Mo Kio MRT, and Suntec City Mall) and has closed one store at One KM Mall, since Oct-17 till-date. We maintained our view that OCK’s store count would reach 92 by end-FY18.
* Chicken and cooking oil prices increased c.5% and c.1% YoY respectively in the period (Source: CEIC)
Following the commissioning of new factory equipment, production has now stabilized with a higher production capacity and efficiency.
Near term headwinds but positive on long-term outlook. New stores opening and product innovations will continue to drive topline growth. The Group is currently reviewing its pricing and promotional strategies. However, we do not expect FY18e gross margin to restore to the 63% level. Nonetheless, we are optimistic that the new factory will yield manufacturing efficiencies and new product offerings.
Maintained Buy with unchanged DCF-derived TP of S$0.98
Successful integration with the adjacent new factory by 3Q18 would be the inflection point for OCK. We remain upbeat that its new factory facilities will increase capacity to fuel their expansion domestically and regionally.