BFood’s chalked in 4QFY22 core PATAMI of RM40.7m (QoQ: +28.8%; YoY: 2.9x) which brought FY22 sum to RM122.7m (YoY: 2.6x). The results trumped estimates at 112%/109% of our and consensus forecasts as the strong sales momentum continued to expand. This was supported by the group relentless effort in expanding its stores. 4QFY22 recorded the highest store launch with 11 new Starbucks outlets. Apart from being a strong festive quarter from Ramadhan and Hari Raya, 4QFY22 was also boosted by the popular demand of seasonal Starbucks drinks, namely Acai Strawberry and Cocoa Macchiato. We raise our FY22/23 forecasts by 25%/25% to account for higher sales volumes and improving margin. Maintain BUY with higher TP of RM5.48 (from RM4.83) based on unchanged 16x PE multiple pegged to CY22 EPS.

Beat estimates. BFood’s chalked in 4QFY22 core PATAMI of RM40.7m (QoQ: +28.8%; YoY: 2.9x) which brought FY22’s sum to RM122.7m (YoY: 2.6x). This surpassed our/street expectations at 112%/109% of full year forecasts. The surprise on the upside was on the back of stronger-than-expected sales coupled with the lower effective tax rate.

Dividends. Declared DPS of 2.0 sen, going ex on 1 Sept 2022 (4QFY21: 1 sen). FY22 dividend amounted to 5.5 sen per share (FY21: 3.0 sen per share).

QoQ. Top line rose by 18.4% to RM291.3m on the back of the higher same store sales growth (SSSG) from new outlet openings. We gather that 4QFY22 recorded strong momentum for outlet openings at 11 new Starbucks stores. Bottom line expanded by 28.8% to RM40.7m attributable to increase in EBITDA margin by 1.5ppt.

YoY/YTD. Revenue climbed 61.2% YoY/39.1% YTD on the back of improved same store sales growth (SSSG). YoY SSSG figures for Starbucks Malaysia: +65%, KRR: +90%, and Starbucks Brunei: +30%. EBITDA margin expanded by 2.2ppt YTD attributable to the group’s agility and effective cost management. Additionally, the effective tax rate also shrunk by 1.3ppt YoY/2.1ppt YTD (FY22: 36.1% vs FY21: 38.2%). Subsequently, FY22 core PATAMI of RM122.7m was recorded, an impressive growth by 2.6x YTD.

Outlook. We understand that the strong sales momentum that surpassed the pre pandemic level was driven by higher transaction counts. This was supported by the group’s relentless effort in expanding its stores. We gather that 4QFY22 recorded the highest store launch with 11 new outlets, of which 45% constitutes drive-through stores. The group has taken efforts in ramping up its marketing and promotions for seasonal drinks and merchandises which command higher margins. Apart from being a strong festive quarter from Ramadhan and Hari Raya, 4QFY22 was also boosted by the popular demand of Starbucks seasonal drinks, namely Acai Strawberry and Cocoa Macchiato. We applaud KRR’s continuous improvement, almost doubling with SSSG of +90% YoY. We opine this was partially contributed by the wider selection and variety in KRR stores. Apart from the signature chicken dishes, KRR now serves fish fillet and meatballs options for consumers to choose from.

Forecast. We raise our FY22/23 forecasts by 25%/25% to account for higher sales volumes and improving margin.

Maintain BUY, with higher TP RM5.48 (from RM4.83) based on 16x PE of CY22 EPS. We are positive on Starbucks which continues to grow via new outlet openings and higher sales from active promotions and innovative products. We are impressed with BFood’s growth opportunity and the company is well-positioned to keep up the momentum.

Source: Hong Leong Investment Bank Research - 17 Aug 2022