BERJAYA FOOD BHD

By AmInvestment Bank Rating: Buy (Maintained) RM1.91

Fair value: AMINVESTMENT Bank (AmInvest) believed the worst was over for Berjaya Food (BFood) with Kenny Rogers Roasters’ (KRR) robust same store sales growth (SSSG) and completed corporate exercise.

The company will also benefit from a stronger ringgit.

Among the key highlights, BFood said Starbucks performed respectably, growing in the mid-teens.

“We expect second half of FY18 to make up for the seemingly shortfall in year-to-date store expansion that amounted to nine stores,” AmInvest said.

The house said KRR Malaysia posted a robust 8.7% SSSG for the quarter.

The management’s turnaround efforts specifically new marquee “OMG Unfried Fried Chicken”, streamlined menus and more affordable set lunches were coming to fruition, according to AmInvest.

On the back of its instore initiatives, KRR Malaysia was projected to add three to five stores to its existing 81 stores by the end of 2018.

Furthermore, it has reached the tail end of its store rationalisation initiative, lowering the possibility of asset impairments, according to AmInvest.

In Indonesia, AmInvest pointed out that KRR Indonesia saw some recognition despite disposing of the asset on Nov 24, 2017.

“It had an operating loss of RM0.7mil as SSSG trended lower at -10% year-on-year for the quarter.

“Instead, there will be a one-off recognition of loss on disposal amounting to RM12mil to RM13mil in the third quarter FY18,” AmInvest noted.

Jollibean, meanwhile, experienced flat earnings growth for the quarter despite 15% lower revenue.

It had 17% fewer stores.

“We expect narrowing losses heading into second half of FY18 with fewer non-performing stores,” AmInvest said.

The house maintained its earnings estimates since this fell in line with its expectations.

Key risks to AmInvest’s forecast include slower-than-expected turnaround at KRR Malaysia and impairments related to unexpected store closures.