KUALA LUMPUR: Analysts remain positive on Berjaya Food Bhd’s (BFood) prospects based on its expansion plan despite the operator of Starbucks Coffee and Kenny Rogers Roasters (KRR) chains yesterday reporting lower second-quarter (2Q) earnings.
Both RHB Investment Bank and Hong Leong Investment Bank (HLIB) Research said the company’s results for the first half of the financial year ending June 30, 2023 (FY2023) were within expectation and maintained their “buy” call with a target price of RM1.29 and RM1.31, respectively.
Yesterday, BFood announced a net profit of RM35.49 million for 2Q FY2023, down nine per cent year-on-year mainly due to margin compression as a result of higher operating costs.
In a research note yesterday, RHB Investment Bank said it remains confident in the management’s ability to execute its expansion plans and capture immense growth opportunities.
It noted that BFood, which already has 433 stores — comprising 373 Starbucks outlets and 70 KRR outlets — as of 2Q FY2023, still targets to open 35 to 40 Starbucks outlets and four to six KRR stores in FY2023.
“We believe the strategic increase in average selling prices should be effective in softening the impact of increasing costs, considering the customer profile and Starbucks’ brand equity. Moving forward, BFood will continue to execute its effective marketing engagements and innovative product launches to drive revenue growth,” it said.
The investment bank also said it has learned from BFood’s management that Paris Baguette — a South Korean bakery brand brought to Malaysia by BFood — recorded a robust performance following the opening of its first store at Pavilion Kuala Lumpur, and the company is targeting five new outlets in the city centre before expanding to other cities.
Meanwhile, HLIB Research applauded the BFood group’s stable performance despite the headwinds faced.
“We understand that this quarter (2Q FY2023) was a volatile period for the group (resulting) from the fluctuation in (the cost of) raw materials and the increase in minimum wage. This year also reflects the normalisation of sales (following the) pent-up demand that benefitted the group last year.
“However, we see a pocket of opportunity from the expected (influx of) Chinese tourists with the border reopening, leveraging on its renowned Starbucks brand equity,” it said in a note.
HLIB Research added that the group appears to be on track to meet its target of opening 35 to 40 new Starbucks stores during this financial year, having successfully launched 17 new stores year to date. – BERNAMA
