Sakae

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#71
Sakae's AR25 has a very long section talking about their operations/innovation. And since Sakae has a corporate advisory arm, I suppose this was done by the corporate advisory arm. It is professionally written up with great sounding bites - innovation, brand, customer engagement, supply chain optimization etc....But nothing much on the taste of the food? I suppose if you are selling food, you should be mainly talking about improving the taste of your food offering.

OPERATIONS REVIEW

The Group will continue to adopt a prudent approach in optimising its business operations by reallocating existing fixed resource expenditures to sustain its core business activities, while remaining agile in identifying and seizing new opportunities that may arise in an increasingly uncertain global market.

In an industry where food safety and traceability are paramount, the Group continues to strengthen its supplier relationships and broaden its sourcing network to build a more resilient, secure, and sustainable food supply chain

The Group remains steadfast in its commitment to strengthening the Sakae brand by focusing on quality, innovation and meaningful customer engagement. By leveraging digital platforms, revitalising brand touchpoints and adapting to changing consumer preferences, we aim to ensure the brand's relevance across generations - delivering sushi and more to our customers, anytime anywhere.

Innovation and productivity are integral to sustaining long-term growth in a fast-evolving F&B industry. The Group is investing in menu innovation, automation, and digital integration to enhance efficiency, strengthen brand differentiation, and deliver superior value to customers.

Sakae's commitment to innovation extends beyond technology to include workforce development, encouraging staff training and empowerment to drive creativity and improve service quality. By fostering a culture of continuous improvement and agility, the Group is well-positioned to adapt swiftly to shifting market trends and competitive pressures.

AR25 https://links.sgx.com/FileOpen/Sakae%20A...eID=863674
I am not a certified financial advisor and so nothing of what I say should be construed as financial advice. Please consult a certified financial advisor for advice instead.
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#72
I will focus on Sakae's 28 Tai Seng Road, this is because that is where most of the asset value in the balance sheet lies.


Thanks to ChatGPT, level 1,4,6 of 28 Tai Seng are likely not part of the Sakae and rented out to comapnies e.g. ijooz pte ltd, a Juke 65 bar, U-need health etc, likely where the 4 mil rental income comes from.

28 Tai Seng Road is valued at 88 million for building + land to the remaining 12 years lease of the land (lease expiry 2037). Land size is about 7,800 sq m.

Based on a JTC land sales to AL Tyres Pte Ltd for industrial 23 year lease zoned B2 (same as 28 Tai Seng Road in built up plot ratio as well), land area of 6103 sq m. The approx land value of 28 Tai Seng road remaining lease is $10 million and if there is a need to extend the lease for 30 more years, an approx $25 million payment is needed

Therefore, a significant portion of Sakae's $88 million valuation is likely attached to the building value; buildings can last a long time sometimes more than an industrial 30-year lease. $20 million debt of Sakae's is secured against this piece of 12 year land+ building

If you were Sakae Holdings, what would you do? Of course, it will be to extend the lease so that the building retains its value, otherwise, in 2037, Sakae would have to demolish the building and zero value it.

How is sakae's cashflow? Positive before interest of debts. However, if you add the interest. </U> Zero cashflow generated </U>

The key now is how will Sakae find the money to extend the lease and continue its path of finding business opportunity. Its likely going be an expensive fund rising exercise to maintain Douglas Foo's ambition; of course, Mr Douglas Foo can consider at 2037, at age 67, to call it a day, end its lease at 28 Tai Seng Road and Sakae Sushi becomes a worthless company. The man had had a fulfilling career of 40 years, earning about 500k-750k trying to grow a business enterprise.

For shareholders? You get to be part of the show and likely nothing back. This company is honestly not worth investing at all given its circumstances. Best to liquidate now to maximize shareholder value. However, the founder has 66% stake and will try his best to turn this sinking ship together with his sister. It will be good if both Brother and Sister reduce their total $1 million annual salary as cost reduction. However, unlikely to happen.

In a situation where the building is not liquidated, what is my fair value estimate of Sakae? Probably $0.000-$0.001 per share (target price)
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