This company, which i thought was a gem when i started investing 4 years ago, have been stagnating or even deteriorate during the past 4 years.

ROIC and Margins were decreasing but the biggest problem have been execution in overseas market. While BreadTalk have been doing well in this realm, Food Junction have struggle with its overseas exploits.

So how did they do for this 3rd quarter? From the profits garner you would think they have improved.

Net profit was 1 million vs 657 k for the 3 quarter in 2007. However, there was a provision for loss on disposal of 1 million taken in 2007. This explains why despite revenue being the same and cost increasing, they have done better.

As a criteria of a good dividend counter, its operating cashflow should be increasing and here you will see that operating profit have actually gone down from 3 million to 1 million. Exactly opposite that of the income statement.

At the cashflow statement, you can see that expenditure have increased from last year. the free cashflow is a negative -200k vs 2.4 million from previous year. This would explain why for this quarter, Food Junction will give out 1 ct dividend vs the normal 2 ct it traditionally give.

The group have accepted an offer to operate a food court at The Gardens, Mid Valley city located in Kuala Lumpur, but i am not expecting this to make an impact on full year results.

Going forward, the impact of Lippo Group on Food Junction seems to be rather lukewarm. You would expect some sort of synergy with them and more ventures into Indonesia and all but the results have not translated to an improving bottom line.

Rather, now Auric Pacific have came in with a partial offer to buy some of our shares at 55 cts. That is much less than the average 63 cts i paid for it.

All this translates to food junction being worse and worse as a dividend play. Rather than sustaining good operating cashflow they have been destroying shareholders’ return with ventures that add less returns compare to their singapore operations.

Based on current price, it looks a good company with high ROIC and zero debt. However, my 4 year affair with it tells me that it will take me more than this to make me add on to it. Key that i am looking at is improvement in business execution. With an improvemnt in that area, the cashflow will come and that will improve my view of this company as a dividend counter.

This counter is on my dividend Screener. Do bookmark this link and follow its daily fundmental changes vs its  price changes.