Kenny Rogers, Starbucks to push Berjaya Food forward
KUALA LUMPUR: Berjaya Food Bhd (Berjaya Food) registered a core net profit of RM21.5 million for its first half of financial year 2021 (1HFY21) which came above expectations to the surprise of analysts.
AmInvestment Bank Bhd (AmInvestment Bank) said the core net profit met with its full year estimates whilst making up 77 per cent of consensus estimates.
This was due to the group’s lower-than-expected operational expenses from effective cost management measures implemented during the height of the pandemic.
“The positive impact of the cost streamlining measures is finally coming into fruition. Also, Kenny Rogers Roasters is expected to break even by end-FY21,” it said in its notes yesterday.
Notably, Berjaya Food’s revenue for its second quarter of FY21 (2QFY21) of RM174.1 million was down five per cent year on year (y-o-y) against RM184.1 million in 2QFY20.
This was due to the lower footfall in stores as customers continued to avoid going out and spending on discretionary goods. Berjaya Food also closed certain non-performing stores during the period.
Starbucks posted a revenue of RM151 million, which was down by five per cent y-o-y in 2QFY21 while Kenny Rogers Roasters’ revenue decreased significantly by 42 per cent to RM13.4 million.
The decline in Starbucks’ revenue was due to the lower footfall at the stores but this was slightly offset by sales in the drive-through outlets.
“As most of Kenny Rogers Roasters stores are located in shopping malls, its revenue was dragged by the reduced footfall,” AmInvestment Bank said.
“As a result, same store sales growth (SSSG) for Starbucks and KRR was minus 3.5 and minus 30 per cents respectively.
“Moving forward, we believe Berjaya Food’s sales growth would be driven largely by the recovery in SSSG as the Covid-19 situation improves and opening of new Starbucks stores.
“Earnings in 2HFY21 are expected to remain rather volatile due to the reimplementation of the MCO in all states except Sarawak starting Jan 13 which will affect sales in the third quarter.
“However, with the easing of the MCO and roll-out of the national vaccination programme at the end of February, we expect to see an improvement in consumer sentiment and a gradual recovery in customer activity, which will result in a pick-up in sales.”
Going forward, the team at Hong Leong Investment Bank Bhd (HLIB Research) expect Kenny Roger Roasters to remain profitable, particularly given the recent announcement by the government to permit dine-in operations restricted to two pax per table for now.
“With regards to Starbucks, we expect Berjaya food to open between 20 to 25 Starbucks outlets in FY21 from 25-30 before Covid-19 outbreak. To date, they have opened nine stores in 1HFY20,” it said in a separate note. “We are also encouraged by Berjaya food’s new business venture “Sala”, a latin-inspired vegan restaurant.
“Berjaya Food expects to double the number of Sala outlets to six this year. While still a small part of the business, we reckon this venture has potential, given the rise in popularity of plant based eating habits.”