BJFOOD (5196) : Berjaya Food Berhad - Slower growth from Starbucks
Target RM3.68 (Stock Rating: ADD)
BFood’s 1HFY4/15 earnings fell short of our (31% of our full-year forecast) and consensus expectations (25%), mainly due to slower-than-expected performance by Starbucks in 2Q. 1HFY15 revenue growth was driven by stronger SSS growth and full consolidation of Starbucks, but net profit growth was subdued due to higher depreciation and interest expenses. We cut our FY15-17 earnings to factor in Starbucks’s slower performance; this lowers our target price, which is based on 23.7x CY16 P/E (30% premium over the peer average). However, we maintain Add as our new forecasts still imply a 3-year earnings CAGR of 41%. Potential catalyst is strong contribution from FMCG Starbucks. BFood declared its first interim DPS of 2.5 sen, in line with our forecast.
1H results impacted by interest expense and depreciation
BFood’s 1HFY15 revenue rose 63.6% but core net profit increased at a slower pace of 13.7% yoy. The stronger revenue was due to (i) stronger same-store-sales growth at Starbucks, (ii) full consolidation of the remaining 50% of Starbucks franchise since 19 Sep, (iii) new contribution from Starbucks Brunei which started operations in Feb 2014, and (iv) new stores (11 KRR outlets and eight Starbucks YTD). We understand that Kenny Rogers (KRR) Malaysia and Indonesia (49% of revenue) witnessed SSS contraction due to slower consumer spending. Jolliebean’s business (accounted for 17% of revenue) was also weak (flat SSS growth) due to some changes in the management team. Despite the widened losses from Indonesia (more new store openings) and small losses in Cambodia, EBITDA increased by 93% yoy. Core net profit rose at a slower rate due to (i) higher depreciation costs, and (ii) higher interest expenses (rose over 200% yoy) incurred for the acquisition of Starbucks.
Business slowed down in 2Q
On a qoq basis, while the revenue jump was driven by (i) full consolidation of the remaining 50% of Starbucks franchise, and (ii) small impact from the higher average selling prices from the tiered pricing system at Starbucks since Jun 14, net profit declined by 16.6% due to higher depreciation, interest and tax expenses. KRR business in Malaysia and Indonesia continued to be weak, and witnessed with SSS contraction. In addition to the slower consumer spending, KRR Malaysia was also impacted by the earlier Hari Raya festival this year. Starbucks’s SSS also unexpectedly declined in 2Q.
Source: CIMB Daybreak - 10 December 2014
Target RM3.68 (Stock Rating: ADD)
BFood’s 1HFY4/15 earnings fell short of our (31% of our full-year forecast) and consensus expectations (25%), mainly due to slower-than-expected performance by Starbucks in 2Q. 1HFY15 revenue growth was driven by stronger SSS growth and full consolidation of Starbucks, but net profit growth was subdued due to higher depreciation and interest expenses. We cut our FY15-17 earnings to factor in Starbucks’s slower performance; this lowers our target price, which is based on 23.7x CY16 P/E (30% premium over the peer average). However, we maintain Add as our new forecasts still imply a 3-year earnings CAGR of 41%. Potential catalyst is strong contribution from FMCG Starbucks. BFood declared its first interim DPS of 2.5 sen, in line with our forecast.
1H results impacted by interest expense and depreciation
BFood’s 1HFY15 revenue rose 63.6% but core net profit increased at a slower pace of 13.7% yoy. The stronger revenue was due to (i) stronger same-store-sales growth at Starbucks, (ii) full consolidation of the remaining 50% of Starbucks franchise since 19 Sep, (iii) new contribution from Starbucks Brunei which started operations in Feb 2014, and (iv) new stores (11 KRR outlets and eight Starbucks YTD). We understand that Kenny Rogers (KRR) Malaysia and Indonesia (49% of revenue) witnessed SSS contraction due to slower consumer spending. Jolliebean’s business (accounted for 17% of revenue) was also weak (flat SSS growth) due to some changes in the management team. Despite the widened losses from Indonesia (more new store openings) and small losses in Cambodia, EBITDA increased by 93% yoy. Core net profit rose at a slower rate due to (i) higher depreciation costs, and (ii) higher interest expenses (rose over 200% yoy) incurred for the acquisition of Starbucks.
Business slowed down in 2Q
On a qoq basis, while the revenue jump was driven by (i) full consolidation of the remaining 50% of Starbucks franchise, and (ii) small impact from the higher average selling prices from the tiered pricing system at Starbucks since Jun 14, net profit declined by 16.6% due to higher depreciation, interest and tax expenses. KRR business in Malaysia and Indonesia continued to be weak, and witnessed with SSS contraction. In addition to the slower consumer spending, KRR Malaysia was also impacted by the earlier Hari Raya festival this year. Starbucks’s SSS also unexpectedly declined in 2Q.
Source: CIMB Daybreak - 10 December 2014
