BJFOOD (5196) - Berjaya Food Berhad - No thanks to weak spending
Target RM2.77 (Stock Rating: HOLD)
BFood’s 9MFY15 earnings were below expectations at 61.4% of our and 58.5% of consensus full-year forecasts, mainly due to the slower-than-expected SSSG from (KRR) and Starbucks Malaysia. 9MFY15 revenue expanded, driven by the full consolidation of Starbucks Malaysia while profit growth was slower due to poor sales and higher finance cost. We cut our FY15-17 earnings forecasts to factor in the slower performance from all businesses. This reduces our target price (still based on 23.7x CY16 P/E). We downgrade the stock from Hold to Add. Despite the weak results, BFood declared a second interim DPS of 1.25 sen (it did not declare any second interim dividend last year), bringing YTD DPS to 3.75 sen, above our expectation. We prefer QL due to its more resilient earnings and good earnings delivery track record.
Stronger 9M driven by the consolidation of Starbucks
BFood’s 9MFY15 revenue surged 122.5% but core net profit increased at a much slower pace of 10.7% yoy. The stronger revenue was due to: 1) stronger Starbucks SSSG, 2) full consolidation of the remaining 50% of Starbucks franchise in Malaysia since 19 Sep 2014, 3) new contribution from Starbucks Brunei which started operations in Feb 2014, and 4) opening of new stores. While Malaysia revenue grew by 1.78x due to the consolidation of the remaining 50% of Starbucks franchise, revenues were flat yoy in Indonesia (+3.4% yoy) and Singapore (+4.3% yoy). Due to the weak consumer spending, which also affected the other retailers, Starbucks SSSG was flat yoy while Kenny Rogers (KRR) Malaysia and Indonesia witnessed negative SSSG due to slower consumer spending. Jolliebean’s business was also weak (flat SSSG) due to some changes in the management team. Indonesia’s profit continued to be in the red in 9MFY15 while Singapore slipped into a small loss of RM0.2m in 3Q. The poor results were also partially impacted by the cancellation of New Year countdown activities due to the AirAsia crash and the later Chinese New Year celebrations this year. In addition to the poor performance from its overseas market, BFood also incurred much higher RM5.8m finance cost (due to the acquisition of Starbucks Malaysia) in 9MFY15 vs. RM0.1m in 9MFY14.
Stronger qoq driven by full quarter consolidation
On a qoq basis, revenue jumped 77% and core net profit 73% due to the full quarter consolidation of the remaining 50% of the Starbucks franchise in Malaysia. All businesses saw SSS contraction in 3Q.
Source: CIMB Daybreak - 11 March 2015
Target RM2.77 (Stock Rating: HOLD)
BFood’s 9MFY15 earnings were below expectations at 61.4% of our and 58.5% of consensus full-year forecasts, mainly due to the slower-than-expected SSSG from (KRR) and Starbucks Malaysia. 9MFY15 revenue expanded, driven by the full consolidation of Starbucks Malaysia while profit growth was slower due to poor sales and higher finance cost. We cut our FY15-17 earnings forecasts to factor in the slower performance from all businesses. This reduces our target price (still based on 23.7x CY16 P/E). We downgrade the stock from Hold to Add. Despite the weak results, BFood declared a second interim DPS of 1.25 sen (it did not declare any second interim dividend last year), bringing YTD DPS to 3.75 sen, above our expectation. We prefer QL due to its more resilient earnings and good earnings delivery track record.
Stronger 9M driven by the consolidation of Starbucks
BFood’s 9MFY15 revenue surged 122.5% but core net profit increased at a much slower pace of 10.7% yoy. The stronger revenue was due to: 1) stronger Starbucks SSSG, 2) full consolidation of the remaining 50% of Starbucks franchise in Malaysia since 19 Sep 2014, 3) new contribution from Starbucks Brunei which started operations in Feb 2014, and 4) opening of new stores. While Malaysia revenue grew by 1.78x due to the consolidation of the remaining 50% of Starbucks franchise, revenues were flat yoy in Indonesia (+3.4% yoy) and Singapore (+4.3% yoy). Due to the weak consumer spending, which also affected the other retailers, Starbucks SSSG was flat yoy while Kenny Rogers (KRR) Malaysia and Indonesia witnessed negative SSSG due to slower consumer spending. Jolliebean’s business was also weak (flat SSSG) due to some changes in the management team. Indonesia’s profit continued to be in the red in 9MFY15 while Singapore slipped into a small loss of RM0.2m in 3Q. The poor results were also partially impacted by the cancellation of New Year countdown activities due to the AirAsia crash and the later Chinese New Year celebrations this year. In addition to the poor performance from its overseas market, BFood also incurred much higher RM5.8m finance cost (due to the acquisition of Starbucks Malaysia) in 9MFY15 vs. RM0.1m in 9MFY14.
Stronger qoq driven by full quarter consolidation
On a qoq basis, revenue jumped 77% and core net profit 73% due to the full quarter consolidation of the remaining 50% of the Starbucks franchise in Malaysia. All businesses saw SSS contraction in 3Q.
Source: CIMB Daybreak - 11 March 2015
