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How is a humble chicken rice recipe worth S$2 million?

Published

8 years ago

on

By SingSaver.com.sg

Timothy Ho of Dollars and Sense tries to make sense out of the S$2 million valuation of Hong Kong Soya Sauce’s S$2 chicken rice recipe.

Can a chicken rice recipe really be worth S$2 million?

That’s the question many Singaporeans are wondering after it was reported that the chef-owner of Hong Kong Soya Sauce Chicken Rice And Noodle at Chinatown Food Complex, Mr Chan Hong Meng, is looking to explore a partnership opportunity to expand his Michelin hawker brand.

The price? S$2,000,000. Along with a few other conditions that any partner will have to also meet.

Valuing the price of a recipe, or the business that currently holds the recipe, is a tricky task. So does one start with the valuation? Here are some possible ways we can think of.

1.Peer Comparison

One of the most straightforward methods would be peer comparison. Investors and business owners look at similar companies within the same industry that have been sold (or valued) in recent years, taking its value as a base, before adding a premium or discount to it.

Mr Chan have said that his asking price was based on the $4 million dollars that Aztech Group paid for Kay Lee Roast Meat in 2014, which also included $2 million for the shop that they own.

The possible flaw in his argument, however, could be whether or not he is actually selling his business, as what the former owners of Kay Lee did, or simply looking for a strategic partner to help him expand the brand.

If he is selling his business, that valuation could make sense based on the deal that was done for Kay Lee Roast Meat. However, if he is looking for a business partner, then the $2 million dollar is similar to what is called in the venture capital space as taking “cash off the table”.

This means that in spite of being a future partner in the business as what he said he wanted to be, the founder is also personally cashing out a significant chunk of value in the form of the $2 million payouts.

Don’t get us wrong. There is nothing wrong with enjoying a great one-time off payout especially in the later years when you are near retirement or contemplating the possibility of retirement. But one cannot have it both ways.

Unless Mr Chan holds the majority in the new partnership, he is unlikely to have any say or control of the future expansion of the business.

2. Multiple Of Revenue

Another way to valuate a business would be to base it on a multiple of its revenue.  But how much revenue does Mr Chan stall generate? Let’s do some estimates.

Mr Chan shared that he sells about 180 chickens a day. At a price of $14 per chicken, we can estimate his sales to be about $2,520 each day.

Chicken Sold Per Day 180
Price Per Chicken $14
Revenue Per Day $2,520
Days Per Month 24
Total Revenue Per Annum $725,000

If we assume 24 days a month schedule, that would give us a revenue of about $725,000 per annum.

Based on a valuation of 2 times revenue, such a business could be worth about $1.45 million. Add in the Michelin star that it has and the valuation of $2 million would reasonable.

3. Projected Future Profits

Instead of revenue, an investor could also base current valuation on projected future profits. For example, if we assume that the current net profit margin the business enjoys is 25% (this is just a guess and include labour, rental, taxes and cost of goods sold), then current profit based on estimated revenue would be about $180,000 per annum.

An investor could be confident of expanding the brand both locally and globally. They may also aim to charge more to increase profit margin, which wouldn’t be a bad idea given the brand name of the business and the willingness of Singaporeans to queue and pay for good food.

Given the current brand value that the company already has, increasing profits by about 4 times could be the goal. If that happens, net profit could be about $720,000 per annum.

Assuming a price-to-earning (P/E) of about 6 times, we could be looking at a business that might be worth about $4.5 million in the future. That’s not a lot, especially for a strategic investor.

4. Brand Value And Operational Synergy

A strategic investor who is already known in the F&B sector could find the potential partnership with Hong Kong Soya Sauce Chicken Rice an attractive one.

Given the fact that the stall already has a loyal fan base in Singapore, it is likely to be able to generate its own cash-flow for years to come. In addition, the Michelin Star it has already earned puts it on the tourist map, a strategic investor could see limited downside to the investment.

At the same time, the upside could potentially be quite high, especially if operational synergy can be obtained.

Is S$2 Million Too Much To Pay For A Chicken Rice Hawker Stall?  

In our opinion, a non-strategic investor would find the sum of $2 million to be too high. Unless they have access to lots of capital to expand aggressively, in addition to the $2 million they have to pay, it would be difficult to grow.

Another Chicken Rice brand, Sin Kee Famous Chicken Rice Recipe, was also sold recently for $42,600. That could represent better value for money if getting a recipe is what a buyer is looking at.

On the other hand, a strategic investor, perhaps a Group that is already running a few F&B businesses, could find this a meaningful partnership to enter into. For such a group, the downside to this investment would be limited, given the brand name already established.

If an investor is able to sync up the chicken stall to its existing business operations, the returns could prove lucrative.

Only time would tell how well this development pan out.

Singsaver.com.sg, Singapore’s go-to personal finance comparison platform, guides consumers on the best money habits with its credit card comparison tool and allows real-time personal loans product comparison.

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WP Engine banned from WordPress.org amid escalating legal fight with Matt Mullenweg

Following Matt Mullenweg’s ban on WP Engine from accessing WordPress.org resources, many WP Engine customers are left vulnerable, as they can no longer access plugin updates or security features. Mullenweg urged users to seek alternative hosts, escalating the legal conflict between the two companies.

Published

7 days ago

on

27 September 2024

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In a sharp escalation of tensions, WordPress co-founder and CEO Matt Mullenweg has publicly criticized WP Engine, a popular hosting provider, while also cutting its access to WordPress.org’s resources.

The dispute centres on legal and trademark issues, with Mullenweg accusing WP Engine of both profiteering off WordPress’s open-source platform and damaging its community.

On 25 September, Mullenweg posted a scathing blog on WordPress.org, stating that WP Engine no longer has free access to the platform’s resources and calling for customers to avoid the service.

He also detailed that WP Engine’s recent actions disrupted thousands of websites. “WP Engine broke thousands of customer sites yesterday in their haphazard attempt to block our attempts to inform the wider WordPress community,” Mullenweg claimed.

The conflict appears rooted in WP Engine’s use of WordPress’s open-source platform while allegedly not contributing to its development or upholding community standards.

At the core of the dispute is WP Engine’s practice of locking down a WordPress feature that tracks revision history for posts. According to Mullenweg, this undermines a crucial aspect of WordPress’s promise of data transparency and protection.

WP Engine, in turn, has argued that Mullenweg is trying to coerce them into paying millions to license the WordPress trademark, a claim Mullenweg denies.

The host provider WP Engine has faced harsh criticism for disabling certain features in WordPress core, which, according to Mullenweg, is central to protecting user data.

“WP Engine wants to control your WordPress experience,” Mullenweg wrote, accusing the company of exploiting WordPress’s free services while making billions of dollars in revenue.

WP Engine’s inability to provide security updates and other resources leaves customers vulnerable, Mullenweg suggested, urging users to consider alternative hosting options.

Additionally, Mullenweg argued that WP Engine would need to replicate WordPress’s security infrastructure independently.

He emphasized that WordPress.org has collaborated with hosting providers to address vulnerabilities at the network layer, a service WP Engine can no longer access freely. “Why should WordPress.org provide these services to WP Engine for free, given their attacks on us?” he asked.

The ban leaves WP Engine in a precarious position, as customers who rely on WordPress plugins and themes may face significant difficulties accessing the latest updates.

These restrictions have raised alarms in the community, as outdated plugins are often the target of cyberattacks. Hackers frequently exploit vulnerabilities in WordPress plugins, potentially compromising millions of websites globally.

The dispute between WordPress and WP Engine has been simmering for some time.

Earlier in September, Mullenweg described WP Engine as a “cancer to WordPress” during a speech at the WordCamp US Summit, accusing the company of profiting off the platform without giving back.

In response, WP Engine sent a cease-and-desist letter to Mullenweg and Automattic, claiming that Mullenweg’s comments were an attempt to extort the company into paying for a trademark license.

WP Engine’s legal team also accused Mullenweg of threatening a “scorched earth nuclear approach” if they refused to comply with his demands.

The cease-and-desist letter was swiftly countered by Automattic, WordPress’s parent company, which asserted that WP Engine had violated WordPress and WooCommerce trademark policies.

The updated trademark policy on WordPress.org explicitly cautions users against assuming WP Engine is affiliated with WordPress. “Many people think WP Engine is ‘WordPress Engine’ and officially associated with WordPress, which it’s not,” the updated guidelines explain.

The legal dispute has thrown both companies and their customers into uncertainty.

While WordPress operates under a GPL (General Public License), which makes the software free for use, hosting providers like WP Engine must offer services beyond the core platform, such as user login systems, update servers, and security monitoring.

Mullenweg’s decision to sever WP Engine’s access to WordPress.org resources has already caused disruption, with many sites reporting functionality issues and concerns about security vulnerabilities.

WP Engine has pushed back against Mullenweg’s actions.

In a public statement, the company accused Mullenweg of abusing his influence over WordPress to disrupt WP Engine customers’ access to WordPress.org, calling the move “unprecedented and unwarranted.”

The company argued that the ban affected not only its users but also developers who rely on WP Engine’s tools to build and maintain WordPress plugins.

As the dispute unfolds, the wider WordPress community is left to grapple with the implications. Developers and hosting providers have expressed concern over the trademark battle, fearing that similar restrictions could extend to them.

The WordPress Foundation, which holds the trademark, has already filed to trademark “Managed WordPress” and “Hosted WordPress,” sparking debate about how this might affect commercial users.

For now, the WordPress ecosystem is in flux as users, developers, and hosting providers wait to see how the legal battle will unfold and whether WP Engine will regain access to critical WordPress.org resources.

Until then, Mullenweg’s message is clear: if you want the true WordPress experience, WP Engine is no longer the place to find it.

Editor’s note: This publication was previously hosted on WP Engine.

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Business

DPM Gan Kim Yong appointed to GIC board as director

Deputy Prime Minister Gan Kim Yong will join the GIC board as a director from 1 October, enhancing his extensive portfolio that includes serving as Singapore’s Minister for Trade and Industry and Chairman of the Monetary Authority of Singapore.

Published

1 week ago

on

24 September 2024

By

SINGAPORE: Deputy Prime Minister (DPM) Gan Kim Yong will join the GIC board as a director starting on 1 October, according to an announcement from the sovereign wealth fund on Tuesday (24 September).

Mr Gan is also Singapore’s Minister for Trade and Industry.

His appointment adds to his extensive portfolio, which already includes his responsibilities as the Chairman of the Monetary Authority of Singapore (MAS) and his role overseeing the Strategy Group in the Prime Minister’s Office.

He is also a member of key national boards such as the Research, Innovation, and Enterprise Council and the National Research Foundation Board.

In a statement, Lim Chow Kiat, Chief Executive of GIC, welcomed Gan’s appointment, stating, “His wide-ranging experience will add valuable insights to important asset allocation and other strategic decisions.”

Lim expressed optimism about the contributions Gan will make to the board in shaping GIC’s investment strategies.

Gan’s career began in Singapore’s Civil Service, where he worked in the Ministry of Trade and Industry and the Ministry of Home Affairs.

In 1989, he transitioned to the private sector, joining NatSteel, a company that produces reinforcement steel products for the construction industry.

During his time at NatSteel, Gan rose to the position of Chief Executive Officer and President in 2005. His leadership at the company spanned several years, during which he contributed significantly to its development.

In addition to his corporate experience, Gan has had a distinguished political career.

He entered politics in 2001 and has since held various ministerial roles, including positions in the Ministry of Education, the Ministry of Manpower, and the Ministry of Health.

His leadership in these ministries contributed to Singapore’s policy development in areas ranging from workforce management to public health.

Gan holds both Bachelor’s and Master’s degrees in Engineering from Cambridge University.

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