Japan Foods
Price target:
RHB Bank Singapore ‘neutral’ 29 cents
Earnings missed, maintains outlook
RHB Bank Singapore’s Shekhar Jaiswal is keeping his “neutral” call on Japan Foods Holdings but with a lower target price of 29 cents from 30 cents previously, following the company’s 9MFY2024 ended Dec 31, 2023, results. For the period, Japan Foods’ patmi came in “well below” expectations no thanks to higher than estimated tax.
Japan Foods reported a patmi of $587,000 in 3QFY2024, reversing the previous quarter’s loss of $130,000. Despite this, due to the “sharp rise” in tax expenses for the quarter, Japan Foods’ 9MFY2024 patmi accounted for only 65% of Jaiswal’s fullyear estimate.
In 9MFY2024, Japan Foods’ revenue of $65 million was 12% higher y-o-y, driven by its expanded halal offerings and a higher number of operating restaurants, accounting for 78% of the analyst’s FY2024 estimate. “We maintain our FY2024 estimates as we expect some nearterm improvement in consumer spending amid recovering domestic economic growth and the supportive measures announced in the 2024 Singapore budget,” writes Jaiswal.
The company remains focused on growing its number of halal-concept restaurants.
In 3QFY2024, it added nine new restaurants, of which six were halal-concept restaurants, also shutting down three non-halal restaurants during the quarter.
With a net addition of six restaurants in the quarter, Japan Foods’ total restaurant count stands at 78, of which 38 are now halal-certified, representing 48% of its total.
In its 1HFY2024 results announcement, Jaiswal notes that the company said that about 45% of the company’s revenue came from its halal-concept restaurants, versus 25% in 1HFY2023.
The analyst writes: “Japan Foods aims to capture a bigger share of the halal restaurant market, and it will continue to explore opportunities to open more restaurants under its existing halal concepts as well as launch new concepts.”
Upside risks include the continued strong performance of the company’s halal-concept restaurants while downside risks include the growth of increased competition in the F&B industry, a manpower crunch, and higher cost of operations due to inflationary pressures.