BJFOOD (5196) - Berjaya Food’s core net profit increases at slower pace
March 12, 2015 : 10:01 AM MYT
Berjaya Food Bhd
(March 11, RM2.60)
Downgrade to hold with a lower target price (TP) of RM2.77 from RM3.68: Berjaya Food’s (BFood) nine months ended January of financial year 2015 (9MFY15) revenue surged 122.5%, but its core net profit increased at a much slower pace of 10.7% year-on-year (y-o-y).
The stronger revenue was due to higher Berjaya Starbucks Coffee Company Sdn Bhd (BStarbucks) same-store sales growth (SSSG), full consolidation of the remaining 50% of the Starbucks franchise in Malaysia since Sept 19, 2014, new contribution from Starbucks Coffee Brunei which started operations in February 2014, and the opening of new stores.
While the Malaysia revenue grew by 1.78 times due to the consolidation of the remaining 50% of the BStarbucks franchise, revenues were flat y-o-y in Indonesia (an increase of 3.4% y-o-y) and Singapore (an increase of 4.3% y-o-y).
Due to the weak consumer spending, which also affected the other retailers, BStarbucks SSSG was flat y-o-y while Berjaya Roasters (M) Sdn Bhd, which operates Kenny Rogers Roasters (KRR), and KRR Indonesia witnessed negative SSSG due to slower consumer spending.
Berjaya Jollibean (M) Sdn Bhd’s business was also weak (flat SSSG) due to some changes in the management team.
BFood Indonesia operation’s profit continued to be in the red in 9MFY15 while Singapore slipped into a small loss of RM200,000 in the third quarter (3Q) of FY15.
The poor results were also partially due to the cancellation of the New Year countdown activities due to the Indonesia AirAsia ( Financial Dashboard) flight QZ8501 crash and the later Chinese New Year celebrations this year.
In addition to the poor performance from its overseas market, BFood also incurred a much higher RM5.8 million finance cost (due to the acquisition of BStarbucks in 9MFY15 compared with RM100,000 in 9MFY14.
On a quarter-on-quarter 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 SSSG contraction in 3QFY15.
We were overly optimistic on the performance of BStarbucks. We did not expect the slower consumer spending to impact BStarbucks’ performance substantially given that it targets the higher-end consumer segment.
While we have expected its KRR business to be affected by the slower consumer spending, the impact was worse than expected.
Given the worse-than-expected results, we cut our FY15 to FY17 earnings forecasts by 21% to 28%, factoring in the weaker SSSG for all its businesses as well as the stronger US dollar against the ringgit.
http://www.theedgemarkets.com
March 12, 2015 : 10:01 AM MYT
Berjaya Food Bhd
(March 11, RM2.60)
Downgrade to hold with a lower target price (TP) of RM2.77 from RM3.68: Berjaya Food’s (BFood) nine months ended January of financial year 2015 (9MFY15) revenue surged 122.5%, but its core net profit increased at a much slower pace of 10.7% year-on-year (y-o-y).
The stronger revenue was due to higher Berjaya Starbucks Coffee Company Sdn Bhd (BStarbucks) same-store sales growth (SSSG), full consolidation of the remaining 50% of the Starbucks franchise in Malaysia since Sept 19, 2014, new contribution from Starbucks Coffee Brunei which started operations in February 2014, and the opening of new stores.
While the Malaysia revenue grew by 1.78 times due to the consolidation of the remaining 50% of the BStarbucks franchise, revenues were flat y-o-y in Indonesia (an increase of 3.4% y-o-y) and Singapore (an increase of 4.3% y-o-y).
Due to the weak consumer spending, which also affected the other retailers, BStarbucks SSSG was flat y-o-y while Berjaya Roasters (M) Sdn Bhd, which operates Kenny Rogers Roasters (KRR), and KRR Indonesia witnessed negative SSSG due to slower consumer spending.
Berjaya Jollibean (M) Sdn Bhd’s business was also weak (flat SSSG) due to some changes in the management team.
BFood Indonesia operation’s profit continued to be in the red in 9MFY15 while Singapore slipped into a small loss of RM200,000 in the third quarter (3Q) of FY15.
The poor results were also partially due to the cancellation of the New Year countdown activities due to the Indonesia AirAsia ( Financial Dashboard) flight QZ8501 crash and the later Chinese New Year celebrations this year.
In addition to the poor performance from its overseas market, BFood also incurred a much higher RM5.8 million finance cost (due to the acquisition of BStarbucks in 9MFY15 compared with RM100,000 in 9MFY14.
On a quarter-on-quarter 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 SSSG contraction in 3QFY15.
We were overly optimistic on the performance of BStarbucks. We did not expect the slower consumer spending to impact BStarbucks’ performance substantially given that it targets the higher-end consumer segment.
While we have expected its KRR business to be affected by the slower consumer spending, the impact was worse than expected.
Given the worse-than-expected results, we cut our FY15 to FY17 earnings forecasts by 21% to 28%, factoring in the weaker SSSG for all its businesses as well as the stronger US dollar against the ringgit.
http://www.theedgemarkets.com
