CATALIST-LISTED food caterer Neo Group is acquiring a 51 per cent stake in local snack manufacturer Royale International Food Industries (RIFI) for S$1.02 million in cash, it said in an exchange filing on Wednesday.

 

The proposed acquisition is being carried out via wholly-owned subsidiary Thong Siek Global, with the consideration financed by internal cash resources and/or bank borrowings.

 

Neo Group' s chairman and chief executive officer Neo Kah Kiat said the move is a " strategic fit" for its food-manufacturing business, and the diversification into snack food products will broaden the group' s revenue stream, with the added benefit of expanding into new overseas markets.

 

RIFI is principally engaged in the manufacture of snacks under its flagship brand, Crusty' s, with a selection of ready-to-eat products such as potato chips, fish skin and soy-based snacks. Neo Group said these snacks are available locally in Singapore, and also exported and sold in overseas markets such as Australia, China, the US and Malaysia.

 

Mr Neo said: " In line with our growth strategies, we intend to actively expand our product offerings to cater to different market segments, to meet changing consumer demand and capture growth opportunities in snacks and ready-to-eat products.

 

" This earnings-accretive acquisition will also allow us to create new income streams, drive our export sales to new and existing markets worldwide, tapping both parties' well-established network across over 30 countries globally."

 

Neo Group said the proposed acquisition is not expected to have any material impact on the group' s consolidated net tangible assets or earnings per share for its current financial year ending March 31.

Neo Group

 

On Nov 10, Neo Group founder, chairman and CEO Neo Kah Kiat acquired one million shares of the Catalist-listed stock for a consideration of S$470,000.

 

This increased his total interest in the homegrown integrated food solutions provider from 81.59 per cent to 82.26 per cent.

 

The acquisition also followed Mr Neo' s acquisitions of 2.85 million shares at 42.0 cents per share on Aug 14, 332,000 shares at 38.9 cents per share between July 29 and 30, and 2,653,300 shares at 42.0 cents per share on July 24.

 

The spouse of Mr Neo, executive director Sally Liew Oi Peng, also increased her deemed interest in Neo Group with the Nov 10 acquisition to 82.26 per cent.

 

On Nov 9, Neo Group announced a profit before tax of S$20.1 million and a net profit of S$18.0 million for its H1FY21 (ended Sept 30), representing increases of 679.0 per cent and 685.8 per cent from S$2.6 million and S$2.3 million in H1FY20 respectively.

 

Backed by higher other income, the strong bottom-line growth was attributed to revenue growth from the group' s core catering and manufacturing businesses, as well as an overall reduction in operating expenses.

 

Mr Neo is an industry veteran with over two decades of leadership experience in catering and food and beverage management.

 

He has led and grown the listed company into Singapore' s largest catering provider and the top events caterer, and also continues to helm and steer the group' s future strategic direction and expansion to become an integrated food and catering solutions provider.

 

Moving forward, the group noted its intentions to focus on growing the market share of its catering business by building upon its strong market recognition and branding, while strengthening its recurring income streams through pursuing institutional catering.

NEO Group' s first-half attributable net profit grew more than five times to S$13.6 million for the period ended Sept 30, 2020, up from S$2.3 million a year ago.

 

This was due to higher other income contributed by higher financial grants from the government, revenue growth from its core catering and manufacturing businesses, as well as an overall reduction in operating expenses including delivery, employee benefits and advertising, it said.

 

This was despite a 3.3 per cent revenue dip to S$88.1 million, mainly due to lower revenue from its supplies and trading business. Earnings per share for the six months ended Sept 30, 2020 was 9.24 Singapore cents, versus 1.58 cent a year ago.

 

Neo Group' s founder, chairman and CE, Neo Kah Kiat noted that with the reopening of activities in June this year, there has been a gradual improvement of the catering business, which contributes over half of the group' s topline.

 

The group has also adapted to changing consumer behaviour by introducing a variety of options ranging from bento sets to mini buffets and healthy takeaway meals, and an upscale of the recurring " tingkat" business.

 

Neo Group has proposed an interim cash dividend of one Singapore cent for the six-month period, but it said it will review the distribution of dividend in view of its business expansion, diversification, and the construction of its headquarters and catering hub at 30B Quality Road. A year ago, it did not pay any dividend.

 

Neo Group' s retail business, comprising a chain of Japanese cuisine outlets, has resumed operations since Phase Two. While the physical footfall and revenue of the outlets located in the heartlands have seen improvements upon reopening, physical footfall at outlets located near offices and downtown areas remained low. The group plans to review the outlets' performance, strategise lease renewal options with landlords, and use online delivery platforms to enhance revenue.

 

While the short-term dormitory contracts and financial grants have helped to mitigate the impact caused by the pandemic on the group' s performance in the first half, these are expected to be scaled down or discontinued in the second half. The effects of the pandemic are thus likely to continue posing further uncertainties and may curtail its growth going forward, it said.

 

Barring any unforeseen circumstances, it expects to stay profitable for the fiscal year ended March 31, 2021.The group also recently diversified into property for additional and recurring revenue streams through rental fees and management fees, as well as potential synergies with its existing businesses, it said.

 

CATALIST-LISTED caterer and food manufacturer Neo Group can now expand into the property business, with shareholders having unanimously approved the diversification at an extraordinary general meeting (EGM) on Thursday morning.

 

Shareholders representing about 124 million shares voted in favour of the move, with no votes against the resolution, according to ballot results released after the market close. No party was required to abstain from voting.

 

Neo Group last month announced plans to go into property development, investment and management, through a joint venture (JV) with Catalist-listed Boldtek Holdings. It will hold a half-stake in a JV company with an initial share capital of S$1 million.

 

The board had said the move could open revenue streams from rent and management fees, synergies with Neo Group' s other businesses.

 

But Neo Group is still looking for opportunities in its core catering and food manufacturing business, and the board does not expect any immediate or significant change in the company' s overall revenue mix at this stage.

 

DrewCorp Services served as the appointed scrutineer for the EGM, which was held electronically. 

 

Separately, independent director Kevin Ng retired at the annual general meeting, vacating the role of remuneration committee chairman. The move leaves Neo Group with just two independent directors, while the audit committee is short of the three-member minimum.

 

Mr Ng, 53, had been a director since June 2012. Listing sponsor CIMB is satisfied that there are no undisclosed reasons for his departure, said the board.

 

It added that there are no unresolved differences in opinion on material matters, or other issues that should be brought to shareholders&rsquo attention.

CATALIST-LISTED Neo Group is heading into the property business for new and recurring revenue streams, its board said on Wednesday, adding that the company is still looking for opportunities in its core catering and food manufacturing business.

 

Its board noted: " As we will be only in the early stages of the venture, we do not expect any immediate or significant change in the company' s overall revenue mix."

 

The group was replying in a bourse filing to questions from shareholders, ahead of its annual general meeting and extraordinary general meeting (EGM) on Thursday.

 

Neo Group announced plans late last month to diversify into property development, investment and management, through a joint venture (JV) with Catalist-listed Boldtek.

 

But shareholders have asked whether Boldtek is " the best partner for Neo Group' s new venture" , citing the decrease in revenue and net loss that it recorded in FY2020.

 

The Neo Group directors replied that Boldtek was picked as a JV partner for its " networks and experience in the property business" , although they declined to comment on Boldtek' s financial performance.

 

" Any potential opportunities undertaken by the joint-venture company will be based on our joint decision-making," the board added.

 

Should shareholders approve the diversification, Neo Group will hold a half-stake in the JV company, which will have an initial issued and paid-up share capital of S$1 million.

 

Neo Group does not face any liquidity or debt-refinancing issues, the board added, in response to a shareholder comment on its " continuous high gearing and the projected capital expenditure for FY2021" . It pointed to a reduction in gearing from 1.91 times in FY2017 to 1.67 times in FY2020, which it said came on " strong operating cash flows" .

 

" With the support of our lenders, we have been able to meet our financial commitments, and repay and refinance our debts with the banks to lower our interest expenses," it added.

 

On shareholder value, the board said that it does not plan to take any action to increase the liquidity of its shares, but may consider doing so in future.

 

When asked whether the group' s dividend payout ratio will be raised from 11.6 per cent, the board replied that it " will be more confident in paying out more dividends to our shareholders when the group achieves higher profitability in the coming years" .

 

In its core business, Neo Group plans to widen its catering market share by growing the number of brands. It also intends to expand product variety and raise capacity in the food-manufacturing business, where plants are running at 40 per cent capacity.

 

This is even as the board said that growth opportunities remain in the loss-making food retail segment, including potential for more retail concepts and stronger food delivery.

 

While the board said that Neo Group does not plan to set up cloud kitchens at its new headquarters, where construction progress has been delayed by Covid-19, " we may consider doing so in the future" . It expects to move into the new premises by end-2021.

 

When asked by shareholders about the impact of the pandemic on its operations, the group said that safe-management measures have hit the traditional catering business, but " we benefited from the short-term dormitory contracts" .

 

Meanwhile, food manufacturing booked 50 per cent growth in the supermarket and export business as demand for home-cooked and ready-to-eat products increased, it added.

 

Separately, Neo Group is carrying out an internal restructuring, under which wholly-owned U-Market Place Enterprise' s frozen-meat business will be transferred to ERs Food. U-Market Place will focus instead on its traditional rice-dumpling business.

 

Regarding the " unviable" MLA construct, the managers claimed they have had to " fund millions worth of necessary and critical operating expenses" of EHT and its portfolio as a result of the master lessees' continuing defaults.

 

" Over the past few months, the available funds of EHT have been decreasing in order to fund such expenses, a substantial portion of which are the obligations and liabilities of the master lessees under the MLAs," they noted

 

The latest termination notices came shortly after the managers served " pay/perform or quit" statutory notices to some master lessees.

 

The " pay/perform or quit" notices, issued on Sept 17, implied that the master lessees should pay the outstanding rent and/or perform the defaulted non-rent obligations within a deadline of between three and 15 days, or they should " peacefully vacate" and surrender the property.

 

On Wednesday, the managers said that terminating the MLAs was a required condition of the lenders' consent to continued extension of further forbearance arrangements, and it is crucial for EHT to take control of the hotels so it can implement potential temporary arrangements for the properties.

 

Notwithstanding the termination, the managers said the master lessors - subsidiaries of EHT' s real estate investment trust (Reit), EH-Reit - will not be waiving any rights or remedies relating to the liabilities and/or obligations of the master lessees under the MLAs, including those accrued before the agreements are scrapped.

 

The EHT managers added that they continue to be in dialogue with the master lessees on possible resolutions to past defaults and/or obligations.

 

In the interim, EH-Reit and the master lessors will continue to provide oversight of the hotels until longer-term replacement lessee solutions are found.

 

This arrangement is necessary and integral to facilitate the stapled group' s restructuring process, according to the managers.

 

Meanwhile, the request for proposal (RFP) process announced on July 23 is underway. The RFP process seeks new investors to inject fresh capital into EHT as part of the stapled group' s restructuring and rehabilitation plan.

 

While just three out of the 18 hotels in its portfolio remain operational currently, the managers envisage that all of EHT' s hotels will eventually reopen to the public, barring any unforeseen circumstances.

 

They added that their efforts " may not necessarily lead to the successful rehabilitation of EHT" , as there are also external factors in play such as the time and process required to implement the termination of the MLAs, having a third-party investor inject capital resources into EHT, and the market conditions of the US hospitality industry.

CEO Neo Kah Kiat says he is constantly in talks with various parties in his search for new partners, floating the idea of possible deals in the region closer to home, but group is adopting a more cautious approach when it comes to M& As

 

AS the pandemic hit the shores of Singapore, Catalist-listed food caterer Neo Group saw millions of dollars worth of buffet catering orders cancelled in February.

 

Demand for catering services took a hit amid safe distancing measures and restrictions on social events and gatherings.

 

Still, Neo Group' s founder, chairman and chief executive Neo Kah Kiat remains unfazed, with his appetite for mergers and acquisitions (M& As) showing no sign of abating.

 

The biggest bugbear for the group, said Mr Neo in a recent interview with The Business Times (BT), is slow growth. This is despite aggressive acquisitions over the years.

 

Mr Neo said he is constantly in talks with various parties in his search for new partners, floating the idea of possible deals in the region closer to home. " I am bold enough but it (growth) is too slow because Singapore businesses are quite small," he said. " I think there are a lot of opportunities beyond Singapore."

 

The group' s focus on M& As is also in part due to the challenging nature of organic growth.

 

As such, M& As will continue to be Neo Group' s " oxygen" , said Mr Neo, highlighting the importance of M& As to the group' s growth strategy.

 

Neo Group has been the largest caterer in town since 2011, with a 20.5 per cent market share in 2019. The group has set its sights on up to a 50 per cent market share by capturing more brands under its growing portfolio of companies.

 

To date, the group has 16 brands under its catering arm. Other than food catering, its other main business segments are in food manufacturing, food retail, and supplies and trading.

 

As Neo Group ramps up growth through M& As over the years, its high gearing had often come under scrutiny. In 2018, for instance, Neo Group made a spate of purchases. It upped its stake in DoDo-branded fish paste products maker Thong Siek and acquired Lavish Dine Catering, followed by How' s Catering, despite posting losses for the half-year of FY18/19.

 

This year, it completed the acquisition of ER Group, which owns and manages warehouses as well as imports and exports food products.

 

For the full year ended March 31, 2020, Neo Group' s net-debt-to-equity ratio stood at 2.24 times compared with 1.65 times a year ago.

 

Asked about the company' s position given its higher net-debt-to-equity ratio entering the pandemic, Mr Neo said that gearing is expected to " come down significantly" in the upcoming financial year on the back of leaner operations and less spending.

 

In addition, Mr Neo said the group will be adopting a more cautious approach when it comes to M& As.

 

" We used to be aggressive in M& As regardless of whether they (the companies) are profitable or not," said Mr Neo. But loss-making companies take time to turn around, he noted.

 

The group is therefore now more selective when it comes to acquisitions, keeping an eye out for companies that are profitable and have positive cash flow.

 

With the food business charting steady growth, Neo Group is looking to make its foray into property development, investment and management.

 

Neo Group plans to form a Singapore-incorporated joint-venture (JV) company with construction firm Boldtek Holdings to carry out the new property business. The proposed JV will be subject to shareholders' approval at an extraordinary general meeting.

 

While venturing beyond the food business seems like an unlikely move, it was no spur-of-the-moment decision for Mr Neo. " I invested in a lot of property, so this is not a very green area for us," he said. " Many years ago, I mentioned to my management that we need to be in the property business because it' s a worldwide business and we won' t be constrained within Singapore."

 

He believes that the property business will bring in a source of recurring income for the company and shareholders through rental fees and management fees.

 

Another possible perk stems from the reduction of rental disruption with third-party landlords should property-related assets under the new division be leased to its existing food businesses.

 

For the three months ended March 31, 2020, the group recorded an 85.9 per cent plunge in net profit to S$554,000 from the year ago period, largely due to a drop in demand for catering services following the Covid-19 outbreak.

 

Against this backdrop, Mr Neo estimates that the catering industry will shrink by some 20 per cent as smaller players fall by the wayside. But he is not the least bit worried about Neo Group' s catering arm. The blow from the pandemic affects the entire industry and not just Neo Group alone, he said. " I am still very confident in terms of catering," he added.

 

The diversified portfolio of catering companies under Neo Group has helped cushion some of the impact. Its " tingkat" business, for instance, grew threefold during the circuit breaker period, serving close to 10,000 people.

 

Asked whether catering will remain a core business for the company, Mr Neo said catering had been the largest contributor in terms of revenue and will continue to lead for at least the next three years.

 

But he pointed out that the food manufacturing arm is growing fast given its global reach. It therefore remains to be seen whether things will change after five years. Its manufacturing segment also thrived during the height of the pandemic when circuit breaker measures were in place, registering a 50 per cent growth in the supermarket and export business.

NEO Group is looking to make its foray into property development, investment and management.

 

This will mean expanding its existing core business of providing end-to-end food and catering solutions, the Catalist-listed firm announced in a regulatory filing on Friday.

 

Neo Group has four main business segments - food catering, food manufacturing, food retail, and supplies and trading.

 

It plans to form a Singapore-incorporated joint-venture (JV) company with construction firm Boldtek Holdings to carry out the new property business.

 

Catalist-listed Boldtek and Neo Group on Friday inked a JV agreement, in connection with the proposed diversification.

 

Operating in Singapore and Malaysia, Boldtek provides general building services, runs a precast manufacturing plant, and has a property development and investment business. It also has interests in soil investigation and treatment.

 

Neo Group noted that the property industry will provide diversified business opportunities, broaden the group' s stream of income and revenue, and enhance shareholder value.

 

The new business will likely bring benefits, including additional and recurrent revenue streams, such as from rental fees and management fees, the company added.

 

Besides, there are potential synergies, as the property-related assets under the new division may be leased to its existing food businesses so as to reduce possible rental disruption with third-party landlords.

 

Neo Group will also be able to cater to a wider range of customers, including venue partners and tenants, in its property-related assets.

 

" The group can leverage its current networks, experience and knowledge in the operation of food and beverage businesses, such as cafeterias, restaurants, bistros and bars, providing quick service and event management solutions," Neo Group said.

 

Another benefit of the proposed business is a more diversified business and income base, which will reduce reliance on the existing business, it added.

 

Neo Group will venture into the property business " prudently" . It does not plan to restrict the property business to any geographical market.

 

In a separate filing on Friday, Boldtek' s board of directors said the proposed JV will help increase Boldtek' s involvement in the property development business and expand beyond its core business of general building and construction.

 

Boldtek did not have any property development projects in the pipeline as at Friday, and the segment accounted for just 1.8 per cent of group revenue in FY2019.

 

Moreover, the JV will allow Boldtek to leverage Neo Group' s business networks and resources while maximising existing revenue streams, the board added.

 

Boldtek and Neo Group were independent and unrelated parties with no prior business, commercial or trade dealings before the JV agreement was signed.

 

Neo Group will convene an extraordinary general meeting to seek shareholders' approval for the proposed diversification, which is expected to change the company' s risk profile.

 

The JV agreement will terminate if shareholders do not approve the diversification.

 

On Aug 14, Neo Group founder, chairman and CEO Neo Kah Kiat acquired 2.85 million shares of the Catalist-listed stock for a consideration of S$1,197,000. At 42.0 cents per share, this increased his total interest in the stock to 81.59 per cent.

 

This followed his acquisition of 232,000 shares at 39.1 cents per share on July 30, 100,000 shares at 38.5 cents per share on July 29 and 2,653,300 shares at 42.0 cents per share on July 24.

 

Prior to his acquisition of 5.2 million shares of Neo Group at 30 cents per share on Feb 13, he maintained a 74.10 per cent interest.

 

The spouse of Mr Neo, executive director Sally Liew Oi Peng, also increased her deemed interest in Neo Group with the Aug 14 acquisition to 81.59 per cent.

 

The company reported on July 23 that despite industry headwinds, the group maintained its stable business momentum with a 2.7 per cent increase in FY20 (ended March 31) revenue to S$185.9 million, compared to S$181.0 million in FY19.

 

On July 24, Neo Group founder, chairman and CEO Neo Kah Kiat increased his direct interest in the Catalist-listed stock via two married deals. He acquired 2,653,300 shares for a consideration of S$1,114,386, at 42 cents per share. One of the married deals saw independent director Kevin Ng How Hwan dispose of his 453,300 shares.

 

On July 29, Mr Neo acquired another 100,000 shares of the listed company for a consideration of S$38,500 on the open market. The three acquisitions saw him increase his total interest from 77.63 per cent to 79.49 per cent. Back on Feb 13, he acquired 5.2 million shares at 30 cents per share.

 

Mr Neo is an industry veteran with over two decades of leadership experience in catering and food and beverage management, and led and grew the group into Singapore' s largest catering provider and top events caterer. He continues to helm and steer the group' s future strategic direction and expansion to become an integrated food and catering solutions provider.

 

As the spouse of Mr Neo, executive director Sally Liew Oi Peng, also increased her deemed interest in Neo Group with the acquisition. Ms Liew maintains a 5.473 per cent direct interest in Neo Group. She has been instrumental in growing the group' s food catering business and helms Deli Hub Catering, and with the deemed interests, also maintains a 79.49 per cent total interest in Neo Group.

 

On July 23, Neo Group announced a 21.2 per cent increase in net profit to S$6.3 million for its FY20 (ended March 31), from S$5.2 million in FY19. The strong bottom-line growth was backed by a 2.7 per cent increase in revenue to S$185.9 million, boosted by substantial revenue growth from the group' s core food catering business.

 

Mr Neo noted that the group' s strategy of nurturing diversity through the build-up of its highly synergistic business segments over the last few years, and by having a multi-brand platform, has continued to deliver resilient performances.

 

Mr Neo also added that the group was encouraged to see good growth momentum, notwithstanding the challenging macro environment brought on by the global pandemic.