Dear readers, yesterday marked the debut of YKGI stock.
YKGI is the operator of Yew Kee Duck Rice and bubble tea brand Chicha San Chen’s Singapore franchise. YKGI stock closed 10.5% down on the first day of its trading yesterday.
I was rather surprised and not surprised at the debut performance of YKGI stock.
Surprised as it has been some time since an IPO debutant stock turned in such a dismal performance on debut day. Surprised as Singaporeans are generally very positive and enthusiastic about their bubble teas. I actually counted more than five bubble tea stores in my neighbourhood and each of these stores draw long queues almost daily.
But in the same vein, I am not surprised too at the dismal performance of YKGI stock yesterday, simply because the bubble tea market in Singapore is rather saturated (and I believe this is or will be the case for the other overseas markets that YKGI is in). For a balanced perspective, YKGI stock is not just about bubble tea, but also about duck rice under Yew Kee (which I find not bad).
Like it or not, many, especially the youngsters will associate YKGI with bubble tea, among all the products that YKGI is offering. And this will be the perception of the investing community as well.
I do not drink bubble tea and I do not invest in YKGI stock. Even if I drink bubble tea, I will also not invest in YKGI stock. This is because food and beverages businesses to me are like commodities business where the profit drivers are mainly in low costs (which should preferably be lower than competitors’ as well). Unless the food and beverages business has a USP, a unique market clout like Coca Cola, then I may consider investing. But bubble tea business, which have low entry are in my thinking, a tad too many in Singapore and in the region.
Before I close off today’s post, while I do not drink bubble tea, I make my own tea: The-O. My usual Lipton tea: hot tea gives strong flavour while cold and iced Lipton tea tastes quite the same as bubble tea: minus off all the preservatives, sugar and salt and hence is a healthier drink!