BERJAYA Food Bhd (BFood), the food & beverage (F&B) arm of the Berjaya Group, is poised for a rebound in sales with the easing of lockdowns in 2H CY2021.
Such is the outlook offered by CGS-CIMB Research which expects delivery channel sales and strong cost discipline to shore up the company’s profitability in the near term as dine-in is temporarily disallowed.
“Despite the persistent COVID-19 pandemic, BFood continued to expand its Starbucks store base in 9M FY6/2021 with a net addition of 13 outlets,” shared analyst Syazwan Aiman Sobri in a company update.
“Of its 329 Starbucks outlets in Malaysia as of end-March, 57 are drive-through stores which have been performing well during the pandemic as they allow a more convenient and safer pick-up option in light of the ongoing movement restrictions due to COVID-19.”
Post-pandemic, CGS-CIMB Research gathers that BFood will continue its expansion target of circa 25-30 new Starbucks outlets annually while continuing adding drive-through outlets which garner higher revenue per sq ft compared with normal stores.
On the hindsight, the research house expects the operations of Kenny Roger’s Roasters (KRR) to remain loss-making in 9M FY6/2021 in view of weak footfall and its heavier reliance on dine-in customers as opposed to Starbucks.
As a response to the uncertainty during the pandemic, BFood has prudently closed three non-performing KRR outlets over 9M FY6/21.
“We believe that revenue and profitability should only meaningfully recover upon the easing of movement restrictions which should be aided by the acceleration of the national COVID19 vaccination drive,” opined CGS-CIMB Research.
For the record, KRR together with vegan-friendly Joybean operations in Malaysia accounted for 8.3% of BFood’s 9M FY6/21 revenue.
All-in-all, the research house reiterated its “add” call on BFood with an unchanged target price of RM2.80 based on an unchanged 19 times CY2022F price-to-earnings ratio (P/E) at a circa 20% discount to the average P/E since its listing in 2011.
“The discount is mainly to reflect recurring risks to F&B retail sales due to risks of movement restrictions in light of the COVID-19 outbreak,” justified CGS-CIMB Research. “We continue to like the stock as an appealing recovery play on the back of its strong branding and execution amid challenges to F&B retail.”
At 10.47am, BFood was up 3 sen or 1.54% to RM1.98 with 41,400 shares traded, thus valuing the company at RM759 mil. – June 10, 2021
