• Maintain BUY, new SGD0.58 Target Price from SGD0.63, 19% upside. as we cut earnings estimates to impute the recent SSSG decline for Ajisen Ramen in Singapore, lower profit contributions from associates, and marginally lower margins for FY19F-21F.
• We remain optimistic about strong revenue contributions from Shitamachi Tendon Akimitsu, and the continued expansion in the number of restaurants for Ajisen Ramen and Menya Musashi.
• Despite delivering 17% YTD returns, its stock remains cheap compared to peers.

Weakness in Ajisen Ramen a One-off Occurrence

During our recent meeting with management, it said that the SGD0.7m y-o-y decline in 1QFY19 (Mar) revenue from the Aijsen Ramen brand in Singapore was attributed to a SGD0.5m decline caused by one restaurant being rebranded from Ajisen Ramen to Menya Musashi.

Meanwhile, the SGD0.4m decline in SSSG for some Ajisen Ramen restaurants was offset by a 10% increase in revenue from newly- renovated Den by Ajisen outlets. Management attributed some weakness in SSSG to the 2018 FIFA World Cup, which led to lower foot traffic at its restaurants in June.

Source: RHB Invest Research - 07 Aug 2018