Sakae Holdings Ltd. Annual Report 2024: Investor Insights and Strategic Directions

Key Facts and Summary:

1. Financial Performance:

   • Revenue: Sakae Holdings Ltd. recorded a total revenue of S$14.4 million in FY2024, down 15.8% from S$17.1 million in FY2023 due to disruptions like store renovations and relocations, especially in Malaysia.
   • Profitability: The company reported a net loss after tax of S$3.3 million, a significant decline from a net profit of S$1.3 million in FY2023. The losses are primarily due to the depreciation of their Singapore building and interest costs.
   • Gross Profit Margin: The gross profit margin stood at 63.9%, slightly lower than the 65.3% achieved in FY2023, reflecting efforts to maintain pricing strategies despite inflation and rising raw material costs.

2. Dividends: The report does not mention any declaration of dividends for FY2024.

3. Key Operational Activities:

   • Digital and Delivery Channels: The company is expanding its focus on digital orders and delivery services, leveraging partnerships and social media for marketing to adapt to post-COVID-19 consumer behaviors.
   • Cost Management: The company has implemented measures to reduce operating costs, including the closure of underperforming outlets, which resulted in a 15.3% reduction in operating expenses.
   • Strategic Expansion: Sakae is expanding into food sourcing and trading, enabling more competitive pricing by working directly with food suppliers, thus optimizing raw material use in their restaurants.
   • Innovation Focus: Continued investment in technologies such as sushi vending machines, portable conveyor belts, and renewable energy sources (solar panels) to drive operational efficiency and improve customer experience.

4. Key Investor Actions:

   • Share Buy-Back Mandate: The company is proposing the renewal of a share buy-back mandate, allowing them to repurchase shares under specific conditions, potentially supporting share value.
   • New Constitution Adoption: The company is also proposing the adoption of a new constitution to streamline its corporate governance in line with updated regulations.

Special Considerations for Investors:

• Losses in FY2024 were mainly driven by non-operational costs such as depreciation of assets, which may impact short-term investor confidence but do not necessarily reflect core business performance.
• Operational Resilience: Sakae Holdings is adapting well post-pandemic with a focus on digital transformation, supply chain optimization, and exploring new revenue streams (e.g., food trading).
• Cautious Outlook: The company foresees continued challenges due to high inflation and competition, indicating a conservative approach to operations while pursuing growth opportunities.

Special Actions for Profitability:

• Technological Integration: Sakae is actively investing in automation (e.g., sushi robots, vending machines), digital menus, and solar energy to improve cost efficiency.
• Strategic Shift: Expansion into food sourcing and trading is a major strategic shift to lower raw material costs, thereby improving procurement efficiency and supporting their farm-to-table philosophy.

Recommendations:

1. For Current Investors (Holding Sakae Stock):

   • Hold: Given the company’s strategic shift towards reducing operational costs and exploring new revenue streams, holding the stock may allow investors to benefit from a potential turnaround once these initiatives take full effect.

2. For Potential Investors (Not Holding Sakae Stock):

   • Wait and Watch: New investors might consider monitoring the company’s performance closely. Given the current net losses and challenging industry environment, it would be prudent to wait until the financial results of their strategic initiatives start reflecting improvement.

Date and Financial Year:

• The report covers the financial year ending 30 June 2024.