KUALA LUMPUR (June 13): CIMB Investment Bank Bhd said Berjaya Food Bhd was expected to post stronger financials in current financial year ending April 30, 2017 (FY17) as the company closed loss-making stores and cut debt.

Berjaya Food runs Kenny Rogers Roasters (KRR), Starbucks and Jollibean outlets in Malaysia and the region. In a note today, CIMB analyst Kristine Wong said Berjaya Food's earnings was expected to improve in tandem with consumer spending recovery.

"While BFood's (Berjaya Food) FY16 core net profit came in below expectations, we expect the group's earnings performance to improve in tandem with the anticipated recovery in consumer spending and continued closure of loss-making stores for KRR Indonesia and Malaysia, which are potential catalysts.

"The group should also post stronger results in FY17 as it pares down its debt. Maintain 'add'. Key risks to our forecast include a significant slowdown in consumer spending and intensified competition in the F&B (food and beverage) industry," Wong said.

CIMB's note followed the announcement of Berjaya Food's FY16 results.

Last Friday (June 10), Berjaya Food reported that 4QFY16 net profit fell to RM3.17 million from RM6.41 million a year earlier. Revenue was higher at RM139.05 million versus RM128.92 million.

Full year net profit dropped to RM22.88 million from RM177.57 million a year earlier. Revenue was higher at RM554.15 million versus RM376.78 million.

Berjaya Food declared a dividend of one sen a share for the quarter in review, bringing full-year dividends to 4.25 sen. Today, Wong said Berjaya Food's core net profit was below the research firm's and consensus forecast at 85% of CIMB's and 75% of consensus estimates respectively.

She said CIMB cut its Berjaya Food earnings per share forecast for FY17 and FY18 by 14% on weaker KRR and Jollibean same-store-sales growth as well as higher tax rates.

According to Wong, CIMB maintained its "add" call for Berjaya Food shares with a lower target price of RM2.02 from RM2.35 previously.

At 12:30pm, Berjaya Food shares fell five sen or 2.7% to settle at RM1.83 for a market value of RM703.64 million. The stock saw 50,500 shares traded.