Starbucks, KRR drive up Berjaya Food earnings

PETALING JAYA: Berjaya Food Bhd’s (Bfood) growth in earnings for financial year 2022 (FY22) is attributed to the execution of effective business strategies across its brands and strengthened consumer confidence, post Covid-19 pandemic.

For the fourth quarter ended June 30, 2022, Bfood’s revenue rose by 18.4% quarter-on-quarter (q-o-q) to Rm291.3mil driven by improved sales with increased footfall during the Aidil Fitri festivities.

This also led to growth in earnings 20% q-o-q to Rm40.8mil. The group’s core net profit of Rm126mil for FY22 is well above RHB Research’s full-year forecast.

“For year-on-year (y-o-y), FY22 revenue jumped 39.1%, owing to healthy same-store sales growth (SSSG) across its brands due to better consumer confidence post pandemic, and contributions from the 29 Starbucks outlets opened during the year – leading to an earnings growth of 134%,” RHB Research said in a report on Bfood yesterday.

It noted the rise in sales expanded FY22 net margin to 12.6% from 7.5% in FY21. Bfood declared a fourth interim dividend of two sen.

RHB Research noted Bfood’s strategy of raising average selling prices has proved to be effective in sustaining margins.

This was carried out through the promotion of seasonal beverages and upsizing of offerings.

“Kenny Rogers Roasters (KRR) remained profitable in 4Q22, while its menu revamp and strategic store closures are indicative of profitability being sustained,” it said.

Moving forward, Bfood is looking to expand operations by opening another 35 to 40 Starbucks outlets and four to six KRR in FY23. At present, it has 356 Starbucks outlets and 68 KRR.

“Fourty percent to 45% of the Starbucks outlets will be in the drive-through concept, which should bode well for the group as we gather sales performance for this store concept has been strong (at about 30% of total Starbucks revenue),” said RHB Research.

It also pointed out that the expansion will be in less-urban areas given the group’s already entrenched network there.

RHB Research said it expects this approach to contribute to sustainable improvement in sales in the following financial years.

RHB Research maintained a “buy” call on Bfood with an unchanged target price of RM4.80 a share.

Ambank Research also expects Bfood’s SSSG growth going forward will be fuelled by store network expansions and improvements in offerings.

“The group’s 4Q22 earnings before interest and taxes (Ebit) margin improved despite the rising general cost of doing business.

“Instead of increasing the prices of products to offset inflation, Bfood is actively improving its product portfolio by pushing higher-margin items and widening its offerings,” Ambank Research said in its report.

Ambank Research added that in 4Q22 alone, Bfood opened 11 new Starbucks outlets and targets another 38 to 40 new stores in FY23. It had only opened 25 to 30 stores pre-pandemic.

The group’s KRR operations in the 4Q22 recorded an EBIT of Rm2.5mil.

As a part of its cost-savings drive, Bfood closed three underperforming stores in FY22.