- We re-affirm our
BUY conviction on Berjaya Food (BFood), with an unchanged fair value of
RM1.55/share, based on our DCF valuation.
- BFood recorded a
net profit of RM7.9mil in 3QFY13, bringing 9MFY13 figures to RM14mil or a
voluminous 60% growth YoY. This was above our expectation, constituting 90% of
our forecast.
- The key variance to
our forecast stems from better-than-expected contributions from Jollibean Food
Ptd (JFPL). The PBT guarantee of RM0.65mil has been met.
- Revenue jumped 40%
QoQ and 11% YoY – attributed to stronger earnings from Kenny Rogers Roaster
(KRR) and Starbucks, thanks to the year-end festive seasons, school holidays
and Christmas.
- In addition,
Starbucks’ and JFPL’s contributions were reflected in 9MFY13 (+60% YoY).
Nonetheless, EBITDA margin shrank to 12% from 17% as KRR Indonesia has not
achieved break-even point.
- The acquisition of
JFPL was completed on 7 December 2012 for S$7.5mil (c.RM19mil) cash. In tandem
with the group’s guidance of lower dividends for FY13F towards gearing up for
expansion, dividends declared to-date amounts to 4.0sen/share. This is above
its historical payout ratio at 40% of earnings.
- All in, we have
fine-tuned and revised upwards our estimates. Earnings are now expected to grow
by 71% to RM19.7mil in FY13F, to reflect stronger contributions from JFPL as
well as additional KRR and Starbucks openings during the year.
- Meanwhile, FY14F
and FY15F earnings are expected to grow by 61% and 20%, respectively. Main key
revenue drivers are:- (1) Full-year contributions from JFPL and Starbucks as an
associate; (2) Jollibean’s accelerated expansion in Malaysia and China; and (3)
Break-even of KRR Indonesia in early FY14F.
- In light with
Jollibean’s expansion in Malaysia – one outlet each in Berjaya Times Square,
Sunway Pyramid and The Curve – are earmarked to open by 1QFY14F. Two more
outlets are currently in the pipeline. JFPL, on the hand, is in negotiations
with prospective landlords to open 5 additional outlets in Singapore.
- To-date, the total
outlets for KRR Malaysia, KRR Indonesia, Starbucks and JFPL Singapore amounts
to 70, 16, 141 and 50, respectively.
- Positive and
favourable prospects for BFood remain intact. Exciting plans have been mapped
out, backed by a strong growing franchise value, equity brand and supportive
operating dynamics. Coupled with its regional presence, we project a healthy
3-year earnings CAGR trajectory of 47%.
- The stock is
trading at a fully-diluted PE of 11 FY14F, within its historical PE band and
below its average PE of 15x.
Source: AmeSecurities
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