BFood reported 1QFY22 results with revenue of RM187.7m (QoQ: +3.9%, YoY: +3.9%) and core PATAMI of RM11.6m (QoQ: -18.5%, YoY: +12.1%). The core PATAMI accounted for 22%/22% of our and consensus full year forecast s which we deem to be within expectations. With further easing of restrictions following the encouraging vaccination rate, we are delighted to witness recovery set in motion for BFood. Maintain BUY with unchangedTP of RM2.69 based on 20x PE multiple pegged to FY22 EPS.

Within expectations. BFood reported 1QFY22 results with revenue of RM187.7m (QoQ: +3.9%, YoY: +3.9%) and core PATAMI of RM11.6m (QoQ: -18.5%, YoY: +12.1%). The core PATAMI accounted for 22%/22% of our and consensus full year forecasts which we deem to be within expectations.

Dividends. DPS of 1 sen declared, going ex on 14 Dec 2021 (1QFY21: 0.5 sen).

QoQ. Sales rebounded +3.9% to RM187.7m on the back of improvement in Malaysia market (+4%) despite a softer sales in other SEA countries. This was mainly due to easing of restrictions. Note that restrictions on dine-in F&B operations were at its height during the Phase 1/2. Despite the uptick in sales, core PATAMI decreased by -18.5% to RM11.6m due to (i) EBITDA margin contraction by -4.1ppt; (ii) higher effective tax rate (1QFY22: 39.3% vs 4QFY21: 32.2%); and (iii) the one-off recognition of income from deferred revenue upon termination of old Starbucks rewards programme.

YoY. Top line registered an uptick of 3.9% with gradual easing of restriction coupled with the higher SSSG (+11.2) from Starbucks the outlet expansion. Encouragingly, core PATAMI rose by 12.1% attributable to lower D&A and effective tax rate (1QFY22: -39.3% vs 1QFY21: -46.6%).

Outlook. With further easing of restrictions following the encouraging vaccination rate, we are delighted to witness recovery set in motion for BFood. We are encouraged by the group’s performance despite the onset of Phase 1/2 in July/Aug. Currently, Starbucks stands at 331 stores (FY21: 327 stores) with 4 new stores launched in 1QFY22. We gather that 3 new outlets are drive-through concept stores and the remaining is a stand-alone store. BFood targets to roll out 35-38 stores in FY22 with focus on drive-through concept stores (currently at 61 stores). Management shared that the take up for takeaway and drive-through have been robust with the change in consumer behaviour. 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 (70 stores currently) would enable the group to continue maintaining its profitability. As for its new venture in vegan Tex-Mex restaurant, Sala stands at 6 stores with target of 3-5 additional openings for FY22. Despite the rally in commodity prices, we expect minimal impact from this as they are generally hedged on a contractual basis 1-2 years in advance.

Forecast. We updated our model for FY21 audited accounts and introduce FY24 forecasts.

Maintain BUY, TP: RM2.69 is unchanged based on 20x PE multiple pegged to FY22 EPS. 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 store would enable the group to continue maintaining its profitability.

Source: Hong Leong Investment Bank Research - 12 Nov 2021