Same-store-sales growth (SSSG) for Starbucks remained healthy at +2.2% on-year.
KUALA LUMPUR: CIMB Equities Research has raised its target price for Berjaya Food
to RM1.67 from RM1.38 as it rolls over its valuation base year to CY19F. Its last traded price was RM1.53.
It said on Monday BFood reported core net profit of RM5.3mil in the first quarter ended July 31, 2017 (1QFY4/18), which was in line at 23% of its and 22% of market’s full-year forecasts.
“The potential disposal of its Kenny Rogers Roasters (KRR) Indonesia operations may lead to an earnings uplift of c.10%/12% for FY18/19F,” it said.
It upgraded the stock to a Hold and added it would turn more positive on the stock if it was successful in disposing KRR Indonesian assets as it will boost future earnings.
BFood reported that 1QFY4/18 turnover increased 9.2% on-year to RM154.4mil while core net earnings rose 6.7% on-year to RM5.3mil.
Sales growth was mostly due to a better showing from Starbucks Malaysia (+ three net new stores year-to-date) and KRR Malaysia which offset the weakness from KRR Indonesia and Jollibean.
“This led to a on-year improvement in the group’s earnings. The group also declared a first interim DPS of one sen (vs. 1QFY17: 0.5 sen), which was in line with expectations,” it said.
CIMB Research said sequentially, the company’s turnover improved 2% on-quarter as a result of better performance from its Malaysia and Indonesia KRR operations as well as from Starbucks.
Pre-tax profit leaped more than 100% on-quarter to RM8.8mil on the back of higher revenue and a low base effect where 4Q was previously impacted by a higher-than-average write-down of fixed assets on the back of the closure of non-profitable KRR stores in Indonesia and Malaysia.
The group closed two KRR Indonesia stores, bringing total store count to 14.
Same-store-sales growth (SSSG) for Starbucks remained healthy at +2.2% on-year while its KRR operations in both Malaysia and Indonesia reported SSSG of +1.5% and -12% on-year, respectively.
“The group will continue its strategy of opening 25-30 new stores a year, which should bolster its earnings going forward.
“As for its KRR Malaysia operations, it will continue to be selective in its new store openings and will continue to introduce various initiatives to turn around the operations in FY18.
“We estimate if KRR Indonesia is successfully divested, this could spell a potential lift of 10%/12% to our FY18/19F EPS (barring any write-offs),” said CIMB Research.
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