Old Chang Kee (OCK) debuted on 16 January as the first company to list in 2008.

The food manufacturer is a household name in Singapore with its famous Old Chang Kee curry puff, a favourite item among Singaporeans for generations. Listed at $0.20 apiece, the company priced itself at 6.2x PE (Price-Earnings Ratio), compared to BreadTalk, which is trading above 30x FY06 earnings.

Is the price low enough for investors to take a bite? While undervalued stocks in a bull-run will attract attention, current market volatility may curb the appetite of investors for such a tasty morsel.

However, tough market conditions did not deter Novena Holdings from taking an 11% stake or 10.3m placement shares in OCK.

TANTALISING TASTE BUDS

OCK is primarily engaged in the manufacture and sale of Halal food products. Apart from its famous curry puffs, the company has expanded its menu to more than 40 products including fish balls, chicken wings and spring rolls. Sales are mainly processed through takeaways at various retail outlets, although delivery is widely available in the CBD district. At Old Chang Kee Take 5 retail outlets, OCK provides dine-in services to cater to a wider market segment.

With 54 retail outlets located island wide, OCK has much of Singapore covered. Its retail outlets are stationed at easily accessible areas serviced with high human traffic flow such as malls, MRTs and bus interchanges.

All outlets are staffed by employees who are trained in product knowledge, customer service and inventory control. OCK is implementing an ERP system that will provide better inventory control through real-time data on the products that are sold, hence improving replenishment time.

Manufacturing of curry puffs is conducted at the single Halalcertified production factory in Woodlands, which has a utilisation rate of 85.7% in 1H07.

IMPRINTING ITS MARK ACROSS THE WORLD

Investors will be delighted to know that OCK has great plans to shove its curry puffs down the throats of overseas consumers. 30.3% or $1m of the net IPO proceeds are earmarked for overseas expansion. Taking a page out of McDonaldʼs strategy book, OCK has established franchises in Indonesia and Philippines.

Currently, the franchises have not contributed significantly to the bottom line, but management remains resolute and is casting its net wide for suitable franchisees in other countries. Potential franchisees will be judged on their financial standing, ability to secure locations and integrity. OCK will assist the franchisees in training of staff, selection of store locations and supply of raw materials.

In addition to franchises, OCK is making its mark across the globe through direct investments. Three retail outlets have been set up in Chengdu, China and at least three more will be added within the next two years. Management is also searching for suitable sites in Australia for production facilities and retail outlets with an eye to open two stores by 2009.

For 1H07, OCK delivered $19m in turnover, an increase of 18.4% from 1H06. However, earnings slipped to $1.6m from $1.7m, attributed to higher raw material and administrative expenses. On the whole, OCK has established a track record of driving turnover growth, accelerating revenue by a CAGR of 27.2% from FY04 to FY06. Nonetheless, soaring costs remain a concern. With FY07 earnings forecasted to be weaker than FY06, what will FY08 bring for investors?