Berjaya Food to bounce back after weak FY20 results

  • Analyst Reports
  • Monday, 24 Aug 2020

KUALA LUMPUR: After recording a disappointing FY20, Berjaya Food Bhd could be kicking off the new financial year with a sharp earnings recovery on the back of improving sales volume.

Volume is understood to have recovered beyond pre-movement control order (MCO) levels following the broader-based relaxation of the MCO, said RHB Investment Bank Research in a note.

"This could be due to strong pent-up demand and higher disposable income – a result of the low interest rate environment and Covid-19-related assistance packages, including the loans moratorium. "Additionally, the Covid-19 crisis could have phased out financially weaker competitors and render Berjaya Food additional market share," it said.

It added that nine underperforming Kenny Rogers Roasters outlets were closed in 4QFY20, which would lead to narrower losses.

The research house noted that it its worst-case scenario has not materialised leading to an earnings upgrade for FY21 and FY22.

Its target price on the stock was raised to RM1.38 after lowering the risk premium assumption in its discounted cashflow computation.

"Conservatively, the TP implies 21.5x CY21F P/E, which is slightly below the stock’s 5-year mean," it said.

For FY20, Berjaya Food's core net loss of RM15.4mil was below RHB's and consensus estimates of RM8mil and RM12mil respectively.

A total dividend per share of two sen was declared in FY20 versus four sen in the previous year.

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