OISHI operates in two main segments, non-alcoholic beverages and food, by leveraging its core brand “Oishi”, and positioning its products by focusing on a Japanese style. The products in OISHI’s non-alcoholic beverages segment cover Japanese green tea, functional drinks, and ready to drink (RTD) coffee. In the food segment, OISHI mainly operates a Japanese restaurant chain, offering various types of food, including buffet, shabu-shabu and sushi, plus noodles. The food operation extends to produce and supply frozen and chilled foods, seaweed snacks, and offers a food delivery service.
Currently, OISHI has four production sites for beverages and central kitchen located in Pathumthani, Chonburi, and Saraburi province. The Saraburi plant was newly opened in March 2013, bringing OISHI additional production capacity using cold aseptic filling (CAF) technology. The latest plant, located in Chonburi province, is now under construction to serve as a new central kitchen, expected to open by the end of 2013.
OISHI’s sales grew to Bt11,634 million in 2012, a 22.5% rise from 2011. Sales continued to rise during the first three months of 2013, climbing by 16% year-on-year (y-o-y). The growth was fueled by an expansion in the number of food outlets, promotional campaigns, and marketing activities. During the last five years, the beverages segment contributed around 54%-58% of OISHI's total revenue while the food segment made up the rest. However, for the first quarter of 2013, the beverages segment generated about 48% of total sales while food segment made up 52%.
OISHI is the leader in the green tea segment in Thailand, under the Oishi green tea. OISHI has about 50% market share. In recent years, OISHI gradually lost some market share as there were new brands entered the market, backed with very aggressive promotional efforts. The company has countered by launching products in new packages and sizes, at the same time, offering more aggressive promotional campaigns. For the food segment, the key strategy is to expand the number of outlets, increase market coverage, and offer a wider variety of food. As of March 2013, the company had in total 165 restaurant outlets.
As of April 2013, ThaiBev was the major shareholder, controlling about 79.7% of OISHI’s outstanding shares. OISHI enjoys great support from ThaiBev in various aspects, including the mandate of the management team and distribution services. ThaiBev, topped by the facility of Sermsuk PLC (Sermsuk), is considered to be the distributor that has the most extensive market coverage in Thailand. The extensive network can broaden OISHI’s customer base. The benefits of synergy with ThaiBev also extend to production. ThaiBev helped bridge supply gaps during times of shortage, and has also supported the manufacture of new products at efficient cost levels. ThaiBev’s recent acquisition of Fraser and Neave Limited (F&N) will bring growth opportunities and synergy in the medium to long term.
OISHI’s financial strength is supported by its growing sales and ample liquidity. However, the operating margin before depreciation and amortization, as a percentage of sales was softening during the last two years. The margin dropped to 9%-10% during 2012 through the first three months of 2013, compared with 13.6% in 2011. The drops were due to higher production costs and handling costs caused by the 2011 flood, as well as the rising marketing and promotional expenses. OISHI’s selling andadministrative expenses (SG&A) for the first three months of 2013 also jumped to 29% of total sales, compared with 22.4% in 2011. In an attempt to strengthen its competitive position, OISHI has added more CAF production lines. CAF will lower beverage packaging costs and the new technology is eligible for the Board of Investment’s (BOI) privileges.
As a result of thinner margins, OISHI’s funds from operations (FFO) dropped from Bt936 million in 2011 to Bt819 million in 2012 and stood at Bt285 million for the first three months of 2013. The FFO to total debt ratio in 2012 was 45%, down from 79% in 2011. Although OISHI’s liquidity remained strong, the larger burden of interest expenses has tightened OISHI’s liquidity profile. The earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio was 27 times in 2012 and 18 times for the first three months of 2013, compared with 77 times in 2011.
OISHI’s total debt rose from Bt1,181 million in 2011, to Bt1,836 million in 2012, and Bt2,478 million at the end of March 2013. The increase came because OISHI borrowed to fund an expansion of food outlets, to construct a new central kitchen, and to invest in new beverage production lines. The new borrowings pushed the debt to capitalization ratio from 29% in 2011, to 37% in 2012, and to 43.6% at the end of March 2013. In the medium term, the leverage is expected to rise as OISHI has planned capital expenditures of Bt2,500-Bt2,700 million per annum during 2013-2015. TRIS Rating expects that OISHI will manage to maintain the healthy capital structure.
Oishi Group PLC (OISHI)
Company Rating: A-
Issue Rating:
Up to Bt1,000 million senior debentures due within 2016 A-
Rating Outlook: Stable