BFood’s chalked in 4QFY21 core PATAMI of RM14.3m (QoQ: +22.9%; 4QFY20: - RM30.2m) which brought FY21 sum to RM47.4m (FY20: -RM19.6m). The results beat expectations at 112%/108% of our and consensus forecasts as the effective cost containment was the major upside surprise. This was evident where 4QFY21 EBITDA margin improved by +3.0ppt QoQ/+18.9ppt YoY. The opening of dine-ins for fully vaccinated consumers in Phase 2&3 should serve as a boost moving into FY22. Maintain BUY with higher TP of RM2.69 (from RM2.48) based on unchanged 20x PE multiple pegged to FY22 EPS.

Beat expectations. BFood’s 4QFY21 core PATAMI of RM14.3m (QoQ: +22.9%; 4QFY20: -RM30.2m) brought FY21 sum to RM47.4m (FY20: -RM19.6m). The results beat expectations at 112%/108% of our and consensus of forecasts as effective cost containment was the major upside surprise.

Dividends. Declared DPS of 1.0 sen, going ex on 8 Sept 2021 (4QFY20: None). FY21 dividend amounted to 3.0 sen per share (FY20: 2.0 sen per share).

QoQ. Despite the flattish revenue of RM180.7m (-0.6%), the cost-saving measures had bolstered its bottom line by +22.9% to RM14.3m. This was evident from the uptick in its EBITDA margin by 3.0ppt. Additionally, the group also recognize d income from the deferred revenue of Starbucks new spending-based rewards upon termination of the old transactions-based rewards programme with successful strategic implementation ahead of schedule (initial scheduled launch in FY22).

YoY/YTD. Revenue climbed 62.0% YoY/13.3% YTD on the back of improved same store sales growth (SSSG). YoY SSSG figures for Starbucks Malaysia: +23%, KRR: +3%, and Starbucks Brunei: +35%. EBITDA margin expanded impressively by 18.9ppt YoY and 8.6ppt YTD. This was attributable to the group’s agility and experience in handling the unprecedented situation during the MCO1.0 in 2020. Additionally, the effective tax rate also shrunk by 7.3ppt YoY/10.8ppt YTD (FY21: 37.8% vs FY20: 48.7%). Subsequently, FY21 core PATAMI of RM47.4m was recorded as compared to the loss of -RM19.6m in SPLY.

Outlook. We are greatly encouraged by the group’s performance despite the onset of MCO3.0/Phase 1 in May/June. Currently, Starbucks stands at 327 stores (FY20: 316 stores) with closing of 3 underperforming stores and 1 new store launched in 4QFY21. BFood targets to roll out 35-40 stores in FY22 with focus for drive-through concept stores (currently at 58 stores). Management shared that the take-ups for takeaway and drive-through have been robust during Phase 1 and we expect the trend to continue on the back of elevated Covid-19 cases. We are still positive on Starbucks which continues to grow via new outlet openings and higher sales from active promotions and introduction of innovative products. Furthermore, a leaner concept KRR store (71 stores currently) would enable the group to continue maintaining its profitability. As for the new Sala outlets (5 stores), we reckon with the growing popularity among health conscious consumers this would be a worthwhile venture for the group.

Forecast. We raise our FY22/23 forecasts by 11%/11% to account for higher sales volumes and better cost control.

Maintain BUY, TP: RM2.69 (from RM2.48) based on unchanged 20x PE multiple pegged to FY22 EPS. Despite the Covid-19 cases continue to chart record highs, we believe that recovery are on the line following the vaccination progress. Additionally, with the further easing of restriction for fully vaccinated individuals in Phase 2 and 3, this should serve as further boost moving into FY22.

Source: Hong Leong Investment Bank Research - 19 Aug 2021