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KUALA LUMPUR (Nov 11): Analysts have raised their target prices (TPs) for Berjaya Food Bhd (BFood) after its net profit for the first quarter ended Sept 30, 2022 (1QFY2023) almost tripled to RM34.7 million.
HLIB Research analyst Syifaa' Mahsuri Ismail kept her "buy" call on BFood, with a 19.1% higher TP of RM1.31 from RM1.10 previously, as the firm rolled forward its valuation year to the financial year ending June 30, 2023 (FY2023) from FY2022, pegged to an unchanged price-earnings (P/E) multiple of 16 times.
"We are still positive on Starbucks, which continues to grow via new outlet openings, and higher sales from active promotions and continual innovative products. Furthermore, a leaner-concept KRR (Kenny Rogers Roasters) store [chain] would enable the group to continue maintaining its profitability," she wrote in a note on Friday (Nov 11).
HLIB Research revised its forecasts upwards by 2% for FY2023 for 3% for FY2024, following the update from BFood's management.
"We applaud the group's commendable trajectory reflected in its SSSG (same-store sales growth) figures. From the management's guidance, SSSG for Starbucks stands at 25%, KRR at 65%, and Starbucks Brunei at 45%.
"BFood plans to open 35 to 40 new stores, with targets in rural markets. To maintain its brand equity, the group will continue to review and refresh its food menu by introducing new food categories, and collaborating with best-in-class culinary experts and celebrities.
"Currently, Starbucks stands at 363 stores (FY2022: 356 stores), with seven new stores launched in 1QFY2023, two of which are drive-through concept stores. As for KRR, a leaner-concept store (68 stores currently) would enable the group to continue maintaining its profitability.
"The group plans to launch nine new KRR stores in FY2023, with a smaller-footprint restaurant concept in high-traffic secondary township areas. As for its vegan venture Sala that stands at seven stores, the group plans to open four more outlets, and introduce innovative plant-based food and beverage offerings to excite customers," she said.
Meanwhile, CGS-CIMB's Khoo Zhen Ye raised the research house's TP for BFood by 3.6% to RM1.02, from 98.5 sen earlier, based on 16.2 times 2023's P/E, which represents a 10% discount to its historical five-year mean P/E of 18 times.
"We lower our P/E multiple to 16.2 times from 18 times previously, as we ascribe a 10% discount to account for a potentially weaker operating environment due to poorer consumer sentiment amid high inflationary pressures and an interest rate hike cycle.
Khoo, however, said the firm remained cautious about BFood's sales momentum in the coming quarters, as it believes that the group's transaction size could decline after the passing of the pent-up demand period, with demand possibly dampened by softer consumer discretionary spending power amid a higher inflationary environment and interest rate hike cycle.
"This could lead to a weaker earnings outlook for BFood should margins continue to decline on a quarter-on-quarter basis.
"We expect BFood’s share price to be supported by its extensive retail presence, with about 472 outlets in Malaysia as at end-1QFY2023," he said.
CGS-CIMB also raised its earnings per share forecasts for BFood for FY2023-25 by 15.6%-24.7% to reflect higher revenue and operating margin assumptions.
On Thursday, BFood announced that its 1QFY2023 net profit surged, thanks to higher revenue as well as a turnaround of the KKR franchise.
Revenue for the quarter rose 50.78% to RM283.05 million, from RM187.72 million a year ago, mainly due to higher SSSG, particularly for Starbucks cafe outlets, as well as the full-quarter effect of the new Starbucks cafe outlets opened during the previous financial year.
At the time of writing on Friday, BFood's share price was up one sen or 1.02% at 99.5 sen, giving it a market capitalisation of RM1.94 billion.