BERJAYA Food Holdings Bhd’s (BFood) unexpected return to profitability has earned praises from the analyst fraternity.
For its 1Q FY6/2021 ended Sept 30 this year, BFood posted a 125% jump in its year-on-year (yoy) net profit to RM10.37 mil (1Q FY6/2020: RM4.61 mil) on the back of a flattish yoy revenue of RM180.72 mil (1Q FY6/2020: RM180.43 mil).
On a quarter-on-quarter basis, the performance marked a return to the black after having posted a net loss of RM30.16 mil in 4Q FY6/2020 ended June 30 this year.
Moving forward, Hong Leong Investment Bank (HLIB) Research expects BFood to:
- Open a total of 18 Starbucks outlets (six already opened) in FY2021 (from a planned 25-30 before the COVID-19 outbreak) mainly in the drive-thru format and in locations outside Selangor; and
- Open up to five small format Kenny Rogers Roasters (KRR) stores due to COVID-19 outbreak impacting dine-in operations.
“Note that small-format stores are mainly set up to serve take away and delivery orders,” wrote analyst Gan Huan Wen. “We are positive on BFood’s strategy to pivot to small format stores at the expense of larger dine-in restaurants.”
Additionally, HLIB Research is also encouraged by KRR’s return to profitability in 1Q FY6/2021 (RM500,000) at the earnings before interest and tax (EBIT) level from reported EBIT losses of RM11 mil in FY6/2020.
All-in, HLIB Research upgraded BFood to “hold” from “sell” previously with a higher target price of RM1.12 (from 79 sen previously)
“While KRR returning to profitability bodes well for the group, Starbucks remains the main growth driver for BFood,” projected the research house.
“While the worst may be over for BFood, we reckon Starbuck’s sales per store will continue to remain below previous years’ level due to soft foot traffic to public areas and continued work-from-home arrangements in many workplaces.”
Bullish about BFood’s prospects, RHB Research maintained its “buy” rating on the company with higher target price of RM1.46 (from RM1.38 previously).
“Notwithstanding the affected footfalls in shopping malls following the implementation of conditional movement control order (CMCO) and pick-up in COVID-19 new cases, the contribution from other Starbucks channels – including drive-through and delivery – have picked up to mitigate the shortfall,” observed analyst Soong Wei Siang.
In addition, the switch in sales channel and consumption pattern (takeaway instead of dine-in) have reduced the headcount required in stores, thus resulting in wage costs savings.
“Meanwhile, KRR has returned to profitability in 1Q FY6/2021, and the management expects the momentum to continue in the seasonally strong 2Q FY6/2021,” added the analyst.
At 11.20am, Berjaya Food was up 21 sen or 18.42% at RM1.35 with 663,100 shares traded, thus giving the company a valuation of RM478 mil. – Nov 13, 2020
