We maintain our BUY call on Berjaya Food (BFood) with a same DCF-derived fair value (FV) of RM1.25/share which implies a FY23F PE of 16x – 0.5 standard deviation above its 3-year mean. Our FV reflects an unchanged 3% premium based on an ESG rating of 4 stars.
BFood’s 6MFY23 core net profit (CNP) of RM70.2mil was within expectations, accounting for 50% of our FY23F net profit and 51.6% of consensus estimates. Comparing to pre-pandemic period, 6MFY19 made up 55% of FY19 CNP.
While we made no changes to FY23F–FY25F topline, our net profit estimates were slightly tweaked lower by 2%-3% to factor in higher operating expenses.
The group declared a higher 2nd interim dividend of 2 sen per share during the quarter under review, bringing its total 6M dividend to 2.5 sen per share.
YoY, the group’s 6MFY23 revenue rose by 26% on the back of higher same-store-sales growth (SSSG) of more than 10% from Starbucks Malaysia coupled with additional openings of cafes. As a result, 6MFY23 CNP jumped 39% YoY.
2QFY23 CNP of RM36mil dropped 9% YoY as margin was affected by higher operating costs albeit a higher revenue of 8% YoY. The increase in operating expenses were mainly contributed by persistently high raw material costs. On a comforting note, the impact of higher minimum wage imposed earlier will be minimal and fully reflected in FY23F.
QoQ, 2QFY23 CNP was up by 2%, supported by an improvement of 4% in revenue, higher consumer spending on year-end festive promotions, school holidays and Christmas season.
We remain positive on BFood’s near-to-medium term outlook, underpinned by: 1) continuous new outlet expansions, and 2) company’s rationalisation to cushion high raw material prices and turnaround loss-making divisions.
This includes revamping its business model for Jollibean Malaysia from kiosk concept to distributorship, which involve producing soy milk drink to be distributed to food service players, such as 7-eleven, Krispy Kreme and Kelava. This will help to partially reduce rental and staff expenses.
The group currently trades at an attractive FY24F PE of 12.1x, 20% lower than its 3-year mean of 15.1x.
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