Reasons why i think Koufu can demonstrate strong growth

Is Koufu Group worth investing in? Ohscene gives his review on it to all his readers!




Koufu Group Limited (SGX.VL6) is one of the largest operators and managers of food courts and coffee shops in Singapore and Macau. 

Koufu was listed on SGX in July 2018, and it has reported a good set of earnings in Q3 2019 net profit grew 19% y-o-y - S$7.2m. Earnings was boosted by new outlets, growth in existing outlets as well as margin expansion.

The group has many brands (shown below) that cater to different segments of customers.



Koufu has many brands that cater to different segments of customers with different price range, brands and outlets.




The strong earnings were driven mainly by higher revenue contribution from the outlet & mall management (+6.6% y-o-y - 3Q19) and (+6.2% y-o-y - 9M19).


Koufu Group strong earnings were driven mainly by higher revenue contribution from the outlet and mall management.


F&B retail segments (+7.3% y-oy) on the back of new outlets. In addition, core net margin expanded to 11.5%, in line with the improvement in food court performance which flows straight into bottom line due to the high operating leverage of the business.

A revenue breakdown by segment. Core net margin expanded with the improvement in food court performance. Year on year increase.



Defensive cash cow backed by strong brands and leading market position. 

Koufu runs highly defensive food court and coffee shop businesses, and is focused on providing competitively priced meals transacted in cash terms. Its outlet and mall management business has seen consistently high occupancy of at least 93% in the last three years. Koufu intends to distribute at least 50% of its profits for 2019, which is sustainable given strong cash-flow generation. This could translate into a potential dividend yield of 3.6% for 2019. 



Koufu’s expansion plans

Koufu has a strategic plan to expand in Singapore through the opening of new food courts and coffee shops in new housing estates, hospitals, commercial malls, and educational institutions.
In Macau, Koufu opened its second food court in April this year at Macau University and is negotiating the lease for a third food court targeted to open in the second half of 2019.

Revenue Breakdown By Geography. Singapore and Macau Food Court Outlets.

Koufu opened five new R& Tea outlets in Singapore in 3Q19. Plans are underway for further expansion as 10 new locations have been secured and are slated to open progressively from 4Q19 to 2020. The group has set a new target of at least 29 R&B Tea and SuperTea outlets by the end of 2019.

Pang Lim, Koufu's chief executive officer, said in July 2019: 
"The Supertea and R&B Tea brands have a strong following in Singapore, and we expect to grow to 30 outlets by the end of the year. We believe we are well-positioned to capitalise on the vast market potential in Indonesia, using it as a springboard for further expansion into the region."

The brands will start with a focus on Jakarta’s Grade A malls, before progressively expanding their footprint across the rest of the country. Koufu may also eventually take its food retail brands into Indonesia, it added.


Koufu Group's Net Profit After Tax increased by a huge margin when comparing 2018 to 2019.

Net Profit After Tax increased from 4.6m in 3Q18 to 7.1m 3Q19 which translates into a whopping 52.3% which shows Koufu is capable of strong growth yet being a defensive stock.


Koufu Group is a cash-generative company with healthy cashflow and balance sheet. Business is resilient through economic cycles.


Profit & Loss
Glancing at Koufu Group's profit and loss, they have been increasing their revenue steadily with Earnings per share increasing also at a good pace.


Robust Balance Sheet and Healthy Cash Flow

Details of Koufu Group's Assets, Liabilities, Cash and Cash Equivalents, Net Asset Value Per Share.



Outlet & Mall Management
49 Food Courts in Singapore, 2 Food Court in Macau.
16 Coffee Shops, 1 Hawker Centre and 1 Commercial Mall in Singapore.

F&B Retail
74 F&B Stalls (Singapore), 4 F&B Stalls (Macau)
23 F&B Kiosks (Singapore), 2 F&B Kiosks (Macau)
7 Quick-Service Restaurants (Singapore)
4 Full-Service Restaurants (Singapore)


F&B Retail, Outlet and Mall Management compiled with many different food courts, coffee shops, kiosks and full-service restaurants.

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The group is also on the lookout for opportunities to expand the brand to the Philippines and Thailand (potentially through JVs), in line with its strategy to expand overseas once the brand has established a strong foothold in Singapore.

They are trying to make a footprint not only in Singapore but Macau also. They also already secured a lease in Malaysia, Malacca and opened their first R&B Tea outlet in Mahkota Parade Melaka back in November, last month.

Koufu Group increasing their Multi-Brand Recognition in the F&B Retail Industry, expanding to new markets like Macau, Malaysia and Indonesia.


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Koufu’s integrated facility in Woodlands Ave 12 is also expected to be completed in 1H 2020 which I believe will contribute even more to the group’s earning. The facility will have collaborative features that will generate recurring rental income, such as smaller central kitchen, to support their expansion and growth. They are also exploring potential partnerships for dim sum and bakery items to widen their customer reach to third-parties and to expand their range of products sold at retail outlets. (pic below)

Koufu Group's Integrated Facility at Woodlands Ave 12 expected to be completed in 1H 2020 which will drive and support growth.


Koufu Group's catalyst for growth including the new integrated facility which will the top line contributor to revenue.

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I'm also expecting Koufu's dividend to have a steady growth and their policy is to pay at least 50% NPAT generated for 2018 and 2019

If you remember what i typed at the start of this post, Koufu's 3Q report showed a 52.3% jump in NPAT generated for 3Q19 and 24.6% jump for total 9M19 which means that investors can expect a bigger dividend payout this year!


(pic below for confirmation - #8)
Koufu Group's investment merits - Complementary Business Segments with Diversified Revenue Stream, Dividend payout of at least 50%. Resilient business with steady income stream.


Lastly, i will be keeping a close watch on this stock for the next 2-3 quarters because Koufu is expected to open 29 New Bubble Tea Stalls, 5 F&B Kiosks and 2 New Food Court which will contribute even more to their revenue and profit.


Corgi playing with a beach ball happily.


That will be all for today! Thanks for reading :)

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