KUALA LUMPUR: AmInvestment Bank Bhd Research (AmBank Research) is maintaining its hold call on Berjaya Food (BFood) with a lower fair value of RM1.02 per share versus RM1.23 previously.
This is due to poor sales performance in the third quarter of the financial year 2020 (3QFY20), largely attributed to the Covid-19 pandemic which resulted in a marked reduction of tourist arrivals to Malaysia and Singapore.
The research house said around half of BFood’s stores were closed during the movement control order (MCO) in Malaysia which started on March 18, 2020, and the Circuit Breaker in Singapore which affected its Jollibean operations in the republic.
“BFood’s nine-month of its financial year 2020 (9MFY20) core net profit of RM11.2 mil came in at 68% of our and 49% of consensus’ full-year earnings forecasts, missing expectations.
“We cut our earnings forecasts by 7% for FY20F, 18% for FY21F and 17% for FY22F. We anticipate weak sales in 4QFY20 but its bottom line should improve quarter-on-quarter, underpinned by BFood’s cost savings measures,” the research house said in a note today.
During the MCO, it said, only 150 Starbucks outlets were opened with sales being split almost equally among the three platforms of delivery, drive-thru and take-away.
However, Ambank Research said the outbreak has increased delivery service sales for Starbucks from 1% to around 30%, and from 10% to 80% for Kenny Rogers Roasters.
“We expect operating profit margins to be better quarter-on-quarter in 4QFY20 due to cost-saving measures. Rental rebates are still in negotiations but we believe that the group will receive at least 20% rental rebates for some of its outlets.
“We expect BFood to reduce its costs by managing its labour costs (40% of outlet workers are on a part-time basis). Lower raw material prices should also alleviate some of the pressure on margins,” it said.
The research house believes the group’s sales in 4QFY20 will be volatile and expects depressed sales during the MCO in April but anticipates improved sales in May and June as the government implemented the conditional MCO on May 4, 2020.
The Hari Raya festive season should also improve sales for the group, it said, adding that more stores have opened (around 290 stores are operational now).
“Beyond 4QFY20, we expect BFood’s performance to gradually recover. We anticipate earnings growth of 28% in FY21F and 30% in FY22F. We believe that BFood’s FY21F and FY22F sales growth would be driven largely by the opening of new stores.
“BFood plans to open up around 20 Starbucks stores in FY21F. We believe the group will take this opportunity to close down underperforming stores in 4QFY20F.” – June 2, 2020, Bernama
