BER­JAYA FOOD BHD

By May­bank In­vest­ment Bank Re­search Buy (main­tain) Tar­get price: RM1.95

The Star Malaysia - StarBiz - - Analyst Reports -

MAY­BANK In­vest­ment Bank (IB) Re­search has raised its tar­get price for Ber­jaya Food (BFood) to RM1.95 from RM1.70 pre­vi­ously. The bro­ker­age says the higher tar­get price is based on a rolled for­ward 27 times the es­ti­mated price-earn­ings ra­tio for 2019.

It main­tains a “buy” call on BFood, not­ing that val­u­a­tions re­main un­de­mand­ing, on the back of de­cent po­ten­tial earn­ings growth.

May­bank IB says it ex­pects BFood’s earn- ings to re­main driven by the group’s Star­bucks chain.

“We re­main pos­i­tive on Star­bucks, premised on its prom­i­nent brand­ing and po­si­tion­ing in Malaysia as the lead­ing cof­fee chain op­er­a­tor. This, in turn, would lead to re­silient sales vol­ume,” the bro­ker­age says.

“On the con­trary, we re­main cau­tious on Kenny Rogers Roaster’s (KRR) earn­ings out­look as com­pe­ti­tion has re­mained stiff for the en­tity,” it adds.

BFood’s core net profit rose 54% year-onyear (y-o-y) to RM6.9mil, ex­clud­ing the forex gain of RM200,000, in the sec­ond quar­ter ended Oct 31, 2018. This brings the group’s core earn­ings to RM12.4mil, up 19% yoy, for the first half of its fi­nan­cial year end­ing April 30, 2019, rep­re­sent­ing 53% of May­bank IB’s full-year es­ti­mate.

The re­search body notes BFood’s sec­ond-quar­ter stronger core earn­ings was largely at­trib­uted to Star­bucks and the dis­posal of loss-mak­ing KRR in In­done­sia in Novem­ber 2017. Dur­ing the quar­ter in re­view, Star­bucks recorded same-store sales growth of 2.7% y-o-y, while 21 new stores have been opened since end-Oc­to­ber 2017, thus rais­ing the num­ber of Star­bucks out­lets to 269 at end-Oc­to­ber 2018.

It is noted that BFood’s strong sec­ond-quar­ter earn­ings were partly pulled back by KRR in Malaysia, which con­tin­ued to record weak per­for­mance with same-store sales de­cline of 10% y-o-y.

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