Only Foodcourts? Think Again. [Koufu Group Limited SGX: VL6]
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Most of us would think of Koufu as a foodcourt business but the truth of the matter is that they now own so many brands around us that I can't even begin to list down.
Here is a list of their main brands which I found on their website,
Compiled from : https://www.koufu.com.sg/our-brands/food-halls/
To add to this, they haven't even listed their most recent acquisition of Deli Asia. For those unsure of Deli Asia, they operate the brand dough culture and if you know dough culture, you'll find that their shops are always packed with people!
Simply put, to earn a million dollars, you can either earn $1,000,000 from one person or $1 from a million people. In the case of Koufu, it is clear that they are going for the latter and it seems to be working really well at the moment.
The circuit breaker dealt a major blow to all companies and food businesses were one of the hardest hit. In times like that, cost control and preservation of capital should be the main priority of any business but NOOOOO the good guys at Koufu were looking at expansion. More details in the link below.
Proposed Acquisition of Deli Asia, Delisnacks, Dough Culture and Dough Heritage by Koufu Pte. Ltd.
News and thoughts are one thing but lets take a look at the daily chart.
Credits to Tiger Brokers
Based on my interpretation, a descending triangle is forming and by common knowledge, a descending triangle is a bearish signal which will eventually lead to prices breaking below support. However, we should never interpret chart patterns in isolation therefore, if we can understand the mindset behind this, perhaps we can get a better understanding why this is happening.
Some Descending Triangles Are Powerfully Bullish
How I interpret this chart is that due to the recent acquisitions by the company, cash is definitely lacking therefore causing the share prices to drop. Company also went XD therefore it is logical for prices to fall. These are very logical reasons for share prices to fall therefore the lower resistance levels are not an indication of investors losing confidence in the company. In my opinion, we're just getting ready for a big push.
In addition to this, Koufu has just confirmed their expansion into overseas markets today.
News Release - Koufu brings Supertea and R&B Tea Brands into The Philippines
I'ld say that this is going to be a larger than usual risk as prices can indeed break below support. However at the end of the day, remember that Koufu is a food business and food is an essential service. Even if prices were to break below support, I'm certain that it will still be a very strong counter in time to come and I wouldn't be too concerned if the price dipped by 10%.
It is going to be an exciting week ahead for Koufu and I can't wait to see the results by the end of the week! Cheers to all and thank you for reading.
Additional Information from the pro-analyst. Please rely on their analysis more than mine.
2020-08-14 Terence Chua Koufu Group - 2H20 Recovery On Track