Berjaya Food up 5.96% on firmer 3Q earnings, dividend

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KUALA LUMPUR (March 15): Shares of Berjaya Food Bhd rose 5.96% at mid-morning today, after the group posted a net profit of RM8.98 million in its third quarter ended Jan 31, 2019 (3QFY19), versus a net loss of RM10.85 million a year ago, as it saw higher profit contributions from its Starbucks operations, as well as improved performance from its Kenny Rogers Roasters outlets.

At 11.28am, Berjaya Food rose 9 sen to RM1.60, with 1.37 million shares done.

It was the group's fourth consecutive profitable quarter, post falling into losses a year ago, after it incurred a loss arising from disposal of its Kenny Rogers Roasters operations in Indonesia.

It declared a third interim dividend of one sen per share, to be paid on April 26.

Meanwhile, Hong Leong IB Research (HLIB) maintained its “Buy” rating on Berjaya Food at RM2.05, with an unchanged target price of RM2.05.

In a note today, the research house said Berjaya Food’s 9MFY19 core profit after tax and minority interest (PATAMI) of RM22.3 million (41.9% year-on-year[y-o-y]) was in line with house, but above consensus expectations, accounting for 74.7% and 82.9% of full-year forecasts respectively.

HLIB analyst Gan Huan Wen said revenue rose 8.4% to RM180.5 million, driven by festive season spending.

“Core PATAMI grew 27.6% due to better sales, as well as Kenny Rogers Roasters (KRR), posting a marginal profit in 3QFY19 vs RM1 million losses in 2QFY19 at the EBIT level. 

“In addition, the top line grew by 9.8% while core PATAMI rose to RM9.0 million (74.8%). Profitability was driven by additional Starbucks café openings, better performance from KRR, and strong same-store sales growth (SSSG) in both Starbucks (8.0%) and KRR (2.5%) operations. The commendable Starbucks SSSG figure was due to the successful introduction of new product offerings and merchandising.

Gan said that overall, Berjaya Food will continue growing its top line by opening 25-30 new Starbucks outlets annually and 50 Starbucks kiosks at Petronas petrol stations, as part of their partnership with Petronas.

“Furthermore, we are greatly encouraged by KRR Malaysia’s turnaround, resulting from streamlining of menu items and closing of unprofitable outlets.

“Note that KRR Malaysia posted a marginal profit in 3QFY19, after losses of RM6.7 million in FY18,” Gan said.