The positive surprise was mainly due to stronger-than-forecasted Starbucks sales growth, further aided by a turnaround in its Kenny Roger
KUALA LUMPUR: RHB Research said Berjaya Food Bhd
’s risk-reward dynamics has turned more favourable, as it believes its shares have more than priced-in the inconsistent earnings delivery and the downside risks from Kenny Rogers Roasters Malaysia (KRRM).
It said on Wednesday that the group was fundamentally well on track to achieve its FY19 earnings growth of 35% year-on-year.
“This comes backed by a robust Starbucks performance while we believe KRRM now offers limited downside risks thanks to the restructuring measures put in place.
“Given its status as the largest listed F&B restaurant chain operator in Malaysia, with a wide network of stores and established brand equity, we view Berjaya Food as a good proxy to bank on the resilience of local consumer spending,” it said in a note.
It added that the share price weakness also presented an attractive entry opportunity for investors seeking exposure in the local consumer sector.
Following the group’s Q1 results, which met its expectations, the research house maintained its FY19-20 earnings forecasts and target price of RM1.75.
It said risk-reward dynamics have turned more favourable as the stock now trades at just 20.3x P/E FY19 following a 16% retreat in share price following the disappointing Q4’FY18 results.
“The valuation is below its 5-year mean which we think more than prices in the inconsistent earnings delivery and the downside risks from KRRM.
“On a brighter note, Starbucks has continued to deliver robust growth, driven by outlet expansion and healthy same store sales growth which should keep Berjaya Food on track to achieve our forecasted FY19 earnings growth of 34.7%,” it added.
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