Restaurant chain offers growth potential and high dividend yield of 7.78% 

S&P reported 2002 earnings growth of 18% to Bt203mn, roughly in line with expectations. The earnings growth was largely due to improvement in both sales and gross margins.

S&P announced to pay a dividend from 2002 earnings of Bt1.9 per share, representing an attractive dividend yield of 7.78% at the current share price. Also, the stock is currently trading on an 18% discount to our fair value estimate of Bt30 per share.

S&P income statement

S&P's 2002 sales came in at Bt2,325mn, up 8.5% yoy, since the company opened new restaurants and bakery outlets and launched new bakery products under the brandname of "Delio". S&P opened new 32 new bakery shops and S&P full-branch restaurants in 2002.

Sale and number of S&P full branch and bakery outlets

S&P launched a range of new bakery products under the brandname "Delio" at the end of last year. Unlike S&P's existing bakery products geared to the upper end of the market, Delio aims to capture the larger medium segment of the market.

S&P achieved 2002 gross margins of 36.1%. The slight improvement of margins was due to progress in improving its raw material management. The company’s sales and administrative expenses for 2002 increased by Bt46mn from 2001 with new branch expansion resulting in an increase in employee and rental expenses. However SG&A-to-sales ratio is still 25.3% the same of last year.

The financial position of the company is very strong with no long-term debt and cash on hand of Bt312mn at the end of December. S&P has already announced to pay a generous dividend of Bt1.9 per share, representing an attractive dividend yield of 7.78% at the current share price.

The current share price is trading on 18% discount from our fair value estimate of Bt30 based on our DCF model. Using other valuation techniques, S&P shares look as cheap on a 2003 PER of 7.39x and EV/EBITDA of 3.36x. We recommend the stock as a "BUY".

Earning summary