Berjaya Food could face weaker quarters as retail slows on coronavirus fears

  • Analyst Reports
  • Friday, 07 Feb 2020

KUALA LUMPUR: Berjaya Food Bhd is expected to face softer quarters ahead as patronage to its food and beverage outlets may experience a slowdown on concerns over the coronoavirus.

In a note, RHB research highlighted that the pandemic might lead to a potential slowdown in retail spending owing to lower footfall in shopping malls and lower tourist arrivals.

The research house cut its FY20F earnings forecast on the stock by 9%, but left its FY21-22 numbers largely unchanged.

RHB reiterated its buy call on the stock while lowering its target price to RM1.62 from RM1.68.

"So far, no notable slowdown in sales was observed by the management, with regards to the coronavirus issue.

"Should cautiousness persist, we believe outlets in shopping malls (45%) and airports are more susceptible, and drivethroughs and outlets in universities and offices should be less affected," it said.

Berjaya Food recently announced 1HFY20 core net profit of RM12.6mil, which met 45-49% of RHB's and consensus estimates.

The research house deemed the results below expectations in view of the forecast weaker quarters ahead.

No year-on-year comparison was available owing to the change in Berjaya Food's financial year end.

For the period, same store sales growth had been flattish since 1QFY20, largely due to the more moderate approach in promotions to preserve margins and the more challenging overall market.

Kenny Rogers Roasters turned profitable in 2QFY20 with Ebit of RM400,000 on cost rationalisation, introduction of a new meny and partially on seasonality.

"Management is cautiously optimistic that the positive traction can be sustained moving forward," said RHB.

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