Oriental
Food is a local manufacturer of confectionary and snacks. My attention is
converged to the company’s snacking division line. Already known for its cheese
balls which fill up the childhood for most people, its snack series come with a
rather low price and guaranteed recipe. Although the snacking market is already
filled up with popular international brand like Lays and Mister Potato,
Oriental Food’s line market share has never deteriorated. Utilizing its
position of cheap and unique recipe, it continually captures the taste and
preference of fellow Malaysians. The group further extend their advantageous
position by offering their products at a smaller quantity. With the already low
price offered, it just get cheaper and reach extensive target groups than
usual. The group has also done quite a splendid job by allowing plenty of
factory visits for charitable organizations and schools. Marketing efforts are
seen where the group seeks distribution channel through family carnivals by
sponsorships. Capital expenditure is undergoing a rather inconsistent pattern
as there is a high of annual RM14 million spending and there is zero spending
on the other extreme. However, the chairman indicates that the group is
focusing on innovating new products to defend their market share. As there will
be large scale research and development going on, I don’t see the group’s cash
reserve allows it with only RM15 million which is equivalent to only 1 year
spending.
As
mentioned above, the company is competing in a market where a lot of
competitors are aggressively fighting for their own market share. ( Note that
it’s not the word ‘increase’ I’m using, instead it’s FIGHTING) Promotion of
lower prices are often held regardless of festivals or special events. Also,
people’s awareness has increased towards their diet. With this trend going on,
snacking business will be more difficult to survive with stricter monitoring of
the food process.
The
operating cash flow is growing steadily with an annual growth rate of only
4.61%. ROA and ROE has rather poor performance. With the three poor
quantitative indicators, the firm has still spaces of improvements. Filtered
out of my list.
Stock: OFI Code: 7107
No comments :
Post a Comment