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Financial Analysis Of Café De Coral

Paper Type: Free Essay Subject: Marketing
Wordcount: 5456 words Published: 4th May 2017

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Café de Coral Group; SEHK: 0341) is a fast food restaurant group which owns and operates fast food chains and specialty restaurants including Café de Coral Dai Bai Dang which operated in USA, New Asia Dabao (æ-°äºžå¤åŒ…), The Spaghetti House ME.N.U., Spaghetti 360°, Manchu WOK ( which operated in USA and Canada, Bravo le Café, Oliver’s Super Sandwiches Espressamente illy, Bistro M, Ah Yee Leng Tong (阿二靚湯) and Super Super Congee and Noodles (一粥麵). The group also has institutional catering business as well as school catering. Asia Pacific Catering (泛亞飲食) restaurants can be found in hospitals, universities, government buildings and container terminals. Luncheon Star (活力午餐) is the brand name in school catering business. Besides restaurants, it has its own food processing and distribution business – Scanfoods (åŒ-歐國際食品) and Denny’s bakery. It currently has more than 15,000 employees. Founded in 1968, the Café de Coral group opened its first Café de Coral restaurant in the Sugar Street, Causeway Bay district of Hong Kong in 1969. Since then, the group has grown to operate over 584 separate outlets across its brands all over the world. Café de Coral group is the largest publicly listed Chinese Fast Food restaurant group in Hong Kong and in the world. In Hong Kong alone, the Café de Coral chain caters to over 300,000 people on an average day.


Founding and early development

The Café de Coral Group was originally incorporated in 1968, but it would not be seen on the street until September 1969 when it opened its first Café de Coral restaurant in Sugar Street, Causeway Bay. The chain gradually expanded over the next decade and went on air in late 1977 when it promoted its restaurants through TV commercials. The infamous motto of “A Hundred Points of Excellence” is well known since then. In 1979, Café de Coral established its first food processing plant in Hong Kong, a move commonly taken to lower costs and to ensure consistency. In 1981, it introduced the first Café de Coral fast food restaurant into public housing estate. In 1986, the Café de Coral Group finally went public, and in 1988, it hit a major milestone by opening up its 50th Café de Coral restaurant. The years after this would be marked by diversification when it operated different restaurants other than Chinese quick food.

Acquisitions, Expansion and Integration

In May 1990, Café de Coral made its first acquisition by buying out the Ah Yee Leng Tong chain for HK$14 million. It set up the first education institutional catering at the Hong Kong Polytechnic University in late 1990. A year later in 1991, it acquired The Spaghetti House, a popular chain that served Hong Kong style Italian food. At the same time, a full scale computerization of restaurant chain and headquarter began to serve the group. The same year, it opened up its second food processing plant which occupied 120,000 square feet. The group had its self-owned headquarter. Redomicilation of company to Bermuda was completed in 1991, due to the uncertainty of handover of Hong Kong to China in 1997.

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1992 was another milestone year for Café de Coral when it opened both its 100th restaurant as well as its first restaurant outside Hong Kong in the nearby city of Shenzhen, China. Its largest syndicated loan in early 90s of HK$300 million was arranged in 1993 to fund the expansion of the group. The first medical Institutional Catering in the Queen Mary Hospital was set up in 1994.

The first food processing plant outside Hong Kong was established in Guangzhou in late 1994. The first Southeast Asia restaurant – The Spaghetti House was franchised in Indonesia in 1995. In order to further expand the business, a HK$200 million Revolving Credit Facility was raised in 1996.

In 1997, Café de Coral opened up its first Bravo le Café restaurant and that same year, it acquired Scanfoods, a ham processing and food distribution business in Hong Kong and China. The institutional catering business was officially renamed to Asia Pacific catering Corporation Limited in 1998. A placement of 40 million shares to US and European institutional investors in 1998 fueled the booming of business.

In 1999, it started yet another restaurant chain called Super Super Congee & Noodle, serving popular local food congee and noodle. It launched the school catering business under the branding of “Luncheon Star” in mid 1999.

Café de Coral was not finished with its trend of acquisitions, and in 2000, it acquired Denny’s Bakery, a bakery manufacturing and distribution business in Hong Kong. That same year, it acquired Manchu WOK, based in Ontario, Canada from Dr. Jack Lew, a North American Chinese fast food chain that had a strong presence in Canada and the United States.

In the years following, Café de Coral also acquired China Inn, a regional Chinese restaurant chain in California, U.S.A. in 2002, New Asia Dabao, the largest Chinese quick service restaurant in Shanghai, China, and Oliver’s Super Sandwiches, a unique niche quick service restaurant chain in Hong Kong; both in 2003. An arrangement of a syndicated loan of HK$200 million is made in the same year. More shares of Manchu Wok were acquired in 2005.

Present day and future planning

In 2006, Café de Coral began rolling out its “fourth generation concept” across all of its locations, effectively renovating many restaurants to bring them up to modern standards. In the year of 2007, Café de Coral made a strategic investment in the Tao Heung Group (SEHK: 0573), a smaller restaurant group that operates 11 brands all over China and Hong Kong.

Two new restaurant brands, namely, ME.N.U (has the meaning of me and you) and Spaghetti 360° were launched in 2008 to meet the increasing demand for casual dining. The successful launch of the premium “illy” coffee brand to the entire chain of Oliver’s Super Sandwiches resulted in the formation of a joint-venture to franchise “Espressamente illy”.

Despite the poor economic situation after the financial tsunami in 2008, Café de Coral had been able to achieve encouraging result. The group is marching towards the one thousand operating units target by 2014 under the 5 years plan.


Café de Coral (å¤å®¶æ¨‚)

As the market leader, Café de Coral is a fast food franchise based in Hong Kong owned by the Café de Coral group. It is a fast food restaurant chain that serves both Chinese and Western food at a budget price. The chain is one of the largest and most popular fast food chains in Hong Kong with more than 140 restaurants in operation (as of 31st March 2009). Six new stores will be open in fiscal year of 2009/2010. It is the flagship of Café de Coral group. It was established in 1968 and today caters to more than 300,000 people (4.3% of Hong Kong’s population!) on an average day.

The fast food is typically Chinese dishes and barbeque cooking with some Western ones. They are very concerned about the quality of food and food safety is the first priority. Combined with other food safety and hygiene measures including stern guidelines on cooking and food storage, their all-round control ensures optimal food hygiene on par with the stringent company standard. In order to provide the delicious food, ingredients are imported from across the world. Under the competition, the company has constantly creativity and innovation to meet the changing needs of customers. The restaurant only offers breakfast during the morning from 7am to 11am, lunch during the noon hours from 11am to 2pm, tea time meals during the afternoon from 2pm to 5:30pm and dinners during the night from 5:30pm until closing hours of the restaurant. As the day progress, its menu changes 3 times to reflect the appropriate meals being sold at that given time of the day. In other words, customer is not able to order breakfast meals during dinner time.

As an environmental friendly corporation, all plates, cups, and bowls are made from melamine resin as they are all washed and reused. The exception is the branches in the Hong Kong International Airport which provide only disposable utensils. Started from July 2007, all branches ceased using straw and chopstick jackets. Individual branches also started implementing their own water and power saving measures. Moreover, all branches have partnered with licensed used oil processing plants in collecting and processing cooked oil and fat. Some branches have even joined the oil refining scheme to help turn toxic waste oil into useful, environmental-friendly bio-fuel. Air pollution can hence be further reduced. Café de Coral also actively participates in social welfare and charitable activities for the needy in order to fulfill our company mission of becoming a socially responsible enterprise.

Café de Coral has established the “Café de Coral Management Academy” as its training headquarters. The institute organizes regular training activities for employees to strengthen their skills and put team spirit into practice. To boost overall performance in terms of operation, Café de Coral provides kitchen staff and chefs on all levels with on-the-job professional training to enhance their knowledge of food management. They also review the service attitudes and performance of staff through an objective “mystery shoppers” program. This practice helps enhance the quality of their services.

The restaurant operates in all urban, rural and town areas of Hong Kong. In the busy commercial districts, there might be three to four in an area. It is easy to find Café de Coral in most major shopping malls, business buildings, and general busy intersections. In new towns such as Ma On Shan, Tin Shui Wai, Tseung Kwan O and Tung Chung, branches often opened in major shopping centres, including those of public housing estates. In Mainland China, Cafe de Coral has spread to Macau, Shanghai, Dongguan, Zhongshan, Panyu, Shunde, Guangzhou, Zhuhai, Shenzhen, Jiangmen, Foshan, and is quickly moving to other cities. There are 62 restaurants in southern China.

Most Cafe de Coral restaurants operate between 7a.m. and 10p.m. The restaurants in the Hong Kong International Airport are the only branches which operate for 24 hours in Hong Kong.

In February 2006, it announced that it would spend approximately HK$100 million in introducing its new 4th generation design of its restaurants. This would renovate its restaurants to include plasma televisions, LED displays for food pickup orders, chromatic mirrors, and Italian marble and leather upholstery. Over HK$35 million will be invested in the fiscal year of 2009/2010 to renovate twelve Café de Coral stores to offer a stylish and comfortable dining environment to the customers and set new industry standards for dining experiences.

Website in Hong Kong: http://www.cafedecoralfastfood.com/

Café de Coral has attained “true international stature with the group’s restaurants branching out into overseas and the larger China market”. The first offshore Café de Coral branch has been formed in Macau since 1992. Other branches are successfully established in the southern cities of Mainland China as well as in Guangzhou.

The product positioning of Café de Coral in Mainland China rests primarily in the up-market menu range of sizzling steak and spring chicken dinner sets which appeal to the prestige driven local preference for an up-market western restaurant experience.

The development of Café de Coral in Mainland China is concentrated mainly in the rich Kwangtung provinces. Branches are distributed at major special economic zones and coastal cities of Shenzhen, Zhuhai and Guangzhou, and regional town centres of Foshan and Jiangmen.

Café de Coral (China) has a total staff number around one thousand, of which 96 percent is local staff from Mainland China. Potential local staffs with outstanding performance have the opportunity to attend training at Café de Coral Management Academy to take up managerial positions. Café de Coral has become the synonymy of quality restaurant management in China. Café de Coral has long been a household name among the Chinese population given its Hong Kong television advertisements are well covered throughout the southern China provinces. As such, any new product launch or premium redemption has always become an instant success.

Café de Coral has developed an amicable working relationship with the local China government officials. The adopted mode of co-operative joint venture and wholly foreign-owned enterprise has provided the group the necessary management freedom and total management control needed for restaurant operations in China. Owing to the uprising Chinese economy, it is part of the group’s strategic plan to steadily develop the China market to tap the vast potential which this market can offer.

Website in China: http://www.cafedecoralcn.com/

The Spaghetti House (意粉屋)

As a pasta expert, The Spaghetti House is a specialty restaurant chain that serves Hong Kong-style Italian cuisine and is positioned as a mid-market chain that is family and tourist friendly. Established in 1979 by an Australian and a British, The Spaghetti House which is the largest pasta restaurant chain in Hong Kong operates 26 outlets in Hong Kong and 6 locations in Southern China. The Spaghetti House is well known among the local palate for its wide variety of products ranging from the ever-popular pizza, spaghetti, salads, rice and snacks to the locally adapted European rice plate as well as the more sophisticated dish of fondue and lobsters. One of the competitive advantages is the full featured menu which has more than 100 menu items. Moreover, there is a wide variety of pasta, macaroni, fusilli, lasagna, gnocchi, spatzle and spaghetti to choose from. The extensive Spaghetti House’s network covers the tourist and shopping districts, especially in Mongkok and Causeway Bay area. Each of the restaurant outlets is instilled with an imported image of a European casual dining restaurant, designed to the highest standard creating a cosy, comfortable, upmarket and friendly ambience well liked by tourists and local people. With the ever increasing number of branches, interior design featuring The Spaghetti House’s traditional cartoon pictures and tiffany lamps as well as the external decoration is constantly upgraded to provide the most comfortable ambience for dining.

Website: http://www.spaghettihouse.com/

Oliver’s Super Sandwiches (利華超級三æ-‡æ²»)

Oliver’s Super Sandwiches was established since 1987 and is considered as the market leader in the niche market of sandwich specialty restaurants. It has been evolved from a primitive “snack bar” to more than 18 branches located in various prime locations in Hong Kong SAR, together with 8 franchised branches in the Philippines. Over the years, it has built up tremendous customer loyalty and goodwill (the green logo means health food) on its well-established branding power. Oliver’s Super Sandwiches has been well positioned as a fast casual restaurant chain offering a clean and healthy lifestyle in dining with a wide range of wholesome product choice from inspired sandwiches with different kinds of fillings such as Cajun Chicken, Roasted Beef, Smoked Salmon, Cheddar Cheese, Avocado, and Mozzarella Cheese to tempting baked potatoes, pastas and freshly made salads.

Following the acquisition by Cafe de Coral Group in June 2003, the already infamous Oliver’s Super Sandwiches has been repositioned with a fundamental rejuvenation on its brand concept. This change represents Oliver’s Super Sandwiches’ new era of extending its customer profile and building brand loyalty as delivering its series of customer-focused commitments by fortifying an entire dining experience in a welcoming and warm environment.

Oliver’s Super Sandwiches operates as a unique quick service restaurant offering highly recognized “made-to-order” sandwiches and salads, together with an assorted selection of hot food such as baked potatoes, pasta, bolognaise, cheese, burger, toast and soup. Through strong local research & development, Oliver’s is constantly introducing new products and flavors in the arena of vegetarian and calorie-controlled diets as well as meat-lovers.

Oliver’s Super Sandwiches’ motto “Fresh Attitude, Your Way!” introduces the images of freshest and healthiest choices catered exclusively for individual taste and preferences. The mission is to satisfy their customers “in what they eat, in where they eat” as such that we would do it their ways. The marketing proposition predicates on the image of being a health, fresh, organic, personal, caring, friendly and stylish brand.

Featuring over thousands combinations of sandwiches with tremendous choices of sandwich breads such as whole wheat, croissant and toastie, fillings, condiments or toppings and sauces, Oliver’s Super Sandwiches offers a wide spectrum of sandwiches, baked potatoes, pastas and salads, together with soups, snacks, desserts and various beverages.

Oliver’s provides a free forum and clean environment for enjoying space, line, form, fresh, light, colour and texture fostering a spirit of relaxation, open attitudes and interpersonal connections for its customers.

Oliver’s Super Sandwiches’ primary customers are universities’ students, white-collar class, office executives, foreigners who live in Hong Kong, professionals, expatriates and health conscious individuals with a middle class socio-economic status.

Oliver’s Super Sandwiches is the pioneer and market leader to create a niche of sandwich specialty restaurants in the marketplace, which is uniquely positioned as a fast casual and health restaurant chain nurturing healthy lifestyle in dining.

Oliver’s Super Sandwiches is eager to project, reinforce and create its image of “fresh, personal, caring, friendly and stylish” as its core brand perception to the customers. These five elements serve as the fundamental drivers for aligning strategies in diverse aspects such as products, service, promotions and ambience.

Through products innovation, shop renovation and continuous brand rejuvenation, substantial foundation of franchise collaboration platform is also built through the overseas franchisees in The Philippines, which open up potentials in the other parts of the region while other areas are always welcome to join.

Website: http://www.olivers-supersandwiches.com/

Ah Yee Leng Tong (阿二靚湯)

Having a long menu of à la carte Cantonese dishes, Ah Yee Leng Tong is a specialty restaurant chain that serves wide range of home-style Chinese soup as well as a variety of regional Chinese dishes. It is also known for its XO sauce, which is a spicy seafood sauce. The famous sauce is made of roughly chopped dried seafood, such as scallop, dried fish and dried shrimp that have been cooked with fresh red chili, diced onion, minced garlic and rapeseed oil. Its restaurants, which average 300 square meters, fuse both traditional and modern furnishings and appeal to both tourists and locals. It used to have several branches in different areas in Hong Kong. After years, there is only one restaurant at the Hong Kong International Airport.

Website: http://www.ahyeelengtong.com/


Located at Amoy Gardens, Ngau Tau Kok in Hong Kong, ME.N.U is a brand new restaurant which provides nice Chinese and Western fast food at affordable price. Since its opening in 2008, it became popular among young customers.

Bravo le Café

Bravo le Café is a premium quick service restaurant chain that serves a mix of Western, Chinese, and Japanese food from noodles, cuisine to toss green salad and sandwiches in a bistro setting designed to appeal to “young and upwardly mobile executives.” It aims to provide an efficient, relaxed and casual dining experience. Pricing is positioned with a slight premium to reflect consumers’ psychographics’ need. There are currently three locations of Bravo le Café, one in the International Finance Centre, one in Central district, and one at the Hong Kong International Airport.

Website: http://www.bravocafe.com.hk

Super Super Congee & Noodles (一粥麵)

As one of the earliest concept stores besides Café de Coral, Super Super Congee & Noodles is a successful fast food chain serving congee and various noodle dishes as its name suggests. As of today, there are more than 17 locations across Hong Kong including in Kwai Fong, Chai Wan, Tseung Kwan O, Shatin, Wong Tai Sin and Tsing Yi, which is the fastest growing brand locally in the group.

New Asia Dabao (æ-°äºžå¤åŒ…)

New Asia Dabao has about 80 outlets in Shanghai area of eastern China. It is now operated by a sino-foreign joint venture, Café de New Asia Group Co., Limited (25%), which is formed by Café de Coral Holdings Limited and Shanghai New Asia (Group) Co., Limited (75%). New Asia Dabao, as depicted in its name, specializes in popular Chinese dumplings and buns. Wide varieties of Chinese breakfast items, soy bean milk, snacks, and noodles, are also served to meet different customers’ palate in different segments of the day. New Asia Dabao has built a sizeable platform of restaurant network in Shanghai, penetrating both the commercial areas and residential neighborhood, offering casual dining and convenient catering services to the community at large. With over 2,500 well trained and experience staff locally, New Asia Dabao provides efficient and effective catering services of quality Chinese quick food to the Shanghai public.

Related website: http://www.ddmap.com/map/chain-4521-%D0%C2%D1%C7%B4%F3%B0%FC.htm

Spaghetti 360°

Spaghetti 360°, a new restaurant brand and a new image, was rolled out in the year with the intent to fill the market niche in the mid-priced specialty restaurant sector. With a stylish, young, fresh and trendy image, Spaghetti 360° achieved remarkable results shortly after its first opening in late 2008. As of 31st March, 2009, there were two outlets under this brand, situated at middle class community – Shatin and tourist area – The Peak respectively.

Dai Bai Dang

Dai Bai Dang is a casual, open-air Asian dining restaurant located in Fresno, California. The take-out order menu can be downloaded from their web page.

Website: http://www.daibaidang.com/

Manchu WOK (滿洲鑊)

Manchu WOK is a Chinese fast food national chain offering consistently high quality Chinese cuisine in a fast food environment in the USA and Canada, similar in concept to another giant chain Panda Express. The chain focused on opening restaurants in high traffic locations such as regional shopping centres and high-density office complexes. Despite the name, the menu does not feature any dishes from traditional Manchurian Cuisine and instead is mostly made up of American Chinese cuisine and Canadian Chinese cuisine. The first store was opened by a Hong Kong immigrant Dr. Jack Lew in 1980 with the first location in Peterborough, Ontario, Canada. The 200 store chain in 35 states and 8 provinces operates primarily in mall locations. In order to expand its business, some of the stores are located at the airports and universities. It is owned by Hong Kong based Cafe de Coral Holdings Ltd since 1989. In 2003 and 2004, it expanded its operations to San Rita, Guam and Naha, Okinawa in Japan. It also has location on a U.S. Army garrison in Yongsan, Korea, as well as a location at the KMCC Food Court on the US Ramstein Air Base in German.

Website: http://www.manchuwok.com/

Asia Pacific Catering (泛亞飲食)

Asia Pacific Catering was set up in 1990 targeted for contractual catering clients such as universities, hospitals, container terminals, government, public and private institutions. This marks a strategic penetration into a market sector, which requires a well-managed, efficient, flexible, dynamic, committed, and resourceful catering operator. The scope of the business has hitherto expanded from its initial clientele of major universities and government institutions to encompass the hygiene-conscious medical hospitals, public and private companies as well. Depending on the scale of the institution, they manage a spectrum of catering concepts in various institutions ranging from cafeterias, staff and student canteens, full-service western restaurants, Chinese gourmet restaurants, as well as coffee shop, cake shops and snack bars. Full range of Chinese cuisine and western dishes are offered together with function-catering tailor-made to our clients’ specification. Asia Pacific Catering also provides consultancy service in designing suitable catering concept for its clients. These include kitchen equipment layout, decoration of dining area and seating arrangement. All lead to a total customer satisfaction relying on its experience in the place. Their management has strong rapport with the institution. Close liaison and meetings are carried out on a regular basis involving our top management all the way down to floor managers and operating staffs in order to exchange views on menus and services for the purpose of continuous improvement.

Website: http://www.apcfh.com/

Luncheon Star (活力午餐)

Luncheon Star was established under Asia Pacific Catering in 1999 to provide door-to-door lunch delivery service to primary and secondary students in Hong Kong. Since the implementation of whole day school, it is one of the major school lunch providers in the marketplace. All schools, students and parents are appreciative of this service, for its nutritional value, environmental friendly packaging, and value for money. All products are manufactured by Luncheon Stars’ self-owned manufacturing plant in Shatin, utilizing through cook-chill technology. For ensuring all products are in the best hygiene and safety condition, they are sealed, and packed with environmental friendly packaging with reusable utensils. Product varieties are in wide spectrum of Chinese and western menu appealing to students of different ages in primary and secondary schools. Luncheon Star provides each school a service team of 2 to 3 members to serve its students. All team members are well trained and professional. They take care all procedures from delivery of food to classroom cleaning up. Their service team is ranked among the highest quality in the market. In additional to the multi-million dollar central production facility, satellite service centers with GPS on trucks are set up to serve its clients in local area for ensuring fast and on time service. Luncheon Star’s school clients are now distributed in all areas in Hong Kong, Kowloon and New Territories. Parents and students can pay the luncheon fees at any convenient stores without extra charge 24 hours a day as well as through PPS online. For ensuring the safety standard and quality management, Luncheon Star has achieved Hazard Analysis and Critical Control Point (HACCP) certificate and ISO 9001 in June 2001. Moreover, it was the first food production factory in Hong Kong which earned the ISO 22000 in 2007. HACCP, ISO 22000 and ISO 9001 are the highest international recognized standards on food safety and quality management. They made Luncheon Star be the first HACCP, ISO 22000 and ISO 9001 certified school lunch provider in the industry.


Fan Ting

A brand new fast-casual restaurant Fan Ting was launched in May 2002 as a pilot-run in Ventura, California, riding on a cook-to-order concept. Since its opening, the restaurant has been performing very well within management’s expectation, and highly popular among the locals. The management expects that there is further room to roll out this quick service restaurant concept in various regions in North America, especially in California.


Scanfoods is principally engaged in the production, distribution and selling of ham, frozen meat, dim-sum, canned food and sausage products in Hong Kong and mainland China under the “Viking Boat” brands. It is a one of leading ham and sausage suppliers in Hong Kong, accounts for significant market share of the domestic processed meat market. For ensuring the safety standard and quality management, Scanfoods has achieved ISO 9001:2000 in 2000. The ISO 9001:2000 is international recognized standard in quality management. It makes Scanfoods’ ham and sausage product being the best quality product in the market by obtaining the HACCP in 2002. Scanfoods owns a 10 acre production base in Dongguan, Guangdong in China; with over 40,000 square feet of factory premises, equipped with the most advanced equipments and imported technologies. Scanfoods’ customer base distributed throughout Guangdong Province in China and Hong Kong. Major supermarket chains, big and small restaurants and hotels in China are its major clients. An efficient and growing sales team in Hong Kong and China supports these large and rapidly increasing markets.

Website: http://www.scanfoods.com.hk/

Denny’s Bakery

The acquisition of Denny’s Bakery in year 2000 led the Group towards further upstream integration into the food manufacturing and distribution business in the Greater China region. Denny’s bread is one of the most popular brands sold in Hong Kong’s supermarkets.


During 1st quarter of fiscal year 2009/2010, Hong Kong accounted for 84% of Café de Coral’s total revenue, registering a mere 0.3% year over year growth to $1,998 millions as same-store sales growth was flat owing to the negative impact of the swine flu outbreak. However, management believes revenue growth will markedly improve in 4th quarter of fiscal year 2009/2010. Café de Coral currently operates 271 outlets in Hong Kong – 182 quick service restaurants, 59 institutional catering facilities and 30 specialty restaurants. In order to capture a greater share of the mass catering market, Café de Coral opened seven Super Super Congee & Noodles outlets in 1st quarter fiscal year 2009/2010, bringing the total to 17.

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Elsewhere, revenue from the mainland increased 26% year over year to $348 millions, with segment profit climbing 21% year over year to $27 millions. Scanfoods, a processor and distributor of ham and sausage products, benefited from the fall in meat prices and contributed a profit of about $10 millions. The mainland outlets recorded a negative same-store sales growth of 6%, reflecting the economic woes in manufacturing regions such as Dongguan and Foshan. At the end of 1st quarter of fiscal year 2009/2010, the company had 69 Café de Coral, 12 Asia Catering and six Spaghetti House locations on the mainland. Meanwhile, North American business continued to improve and approached a breakeven with a small loss of $1m, which was only attributed to amortization of trademark and franchise rights. After the closure of 13 stores, the company operated 169 outlets in North America – 93 in the US and 76 in Canada.

Increasing capacity for future expansion and designed to enhance efficiency and productivity, two new food-processing plants in Hong Kong and the mainland are under construction with completion expected in 2011 and 2012, respectively. On the retail front, 30 stores are expected to be open within Financial Year 2010; 15 each in Hong Kong and the mainland, which will underwrite revenue growth ahead. However, the company’s profitability will remain most vulnerable to rising rental and food costs. Our target price of $18.54 is based on an undemanding forward FY10 P/E of 20.6x or a PEG of 1.5x, based on our projected EPS CAGR of 14% for FY09-11.


Café de Coral group is cash rich. Its cash position remained strong over the past few years. It has zero in debt and around HK$700 to 800 million in cash. That is about 2 to 3 times of averag


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