A Look at Old Chang Kee

The recent big drop in Old Chang Kee Q4 results had got me interested in looking at the financial numbers behind this brand that almost all locals are familiar with. Let's look at the price movement.

1. Overall trending is positive over the period of 10 years. At current point of time, I would say that it is trading close to the average trendline near 50%.

2. Look at the chart plotted for Price vs EPS vs NAV. Stock price got extremely inflated after 2013. Over the last 3 years from 2014 onwards, EPS has been on the decline. 

3. For measurement of EPS, i like to compare to historical P/E ratio. The average P/E over the last 10 years should be around 13. If i adjust it to post 2008, average P/E should fall near 15-16. At current price, I would only be interested if the price can fall back to 0.6x region to justify a fair value.

4. A look at the fundamental numbers of the business. I don't like the fact that margins are dropping over the past 5 years while stock price has not. Debt level has gone up as well while ROE/profit have not. While it has been paying out dividends consistently, I would question whether the level of dividend payout will be sustainable in the future, seeing that the payout ratio has gone up higher than 100% in the last 2 years.

5. I will only be interested if the price fallen to $0.6x region. While OCK will be in my watchlist, I will not be vested in it for the time being.