KUCHING: Berjaya Food Bhd (Berjaya Food) has further strengthened its position as a food and beverage (F&B) player with the acquisition of the remaining 50 per cent stake in Berjaya Starbucks Coffee Company Sdn Bhd (Berjaya Starbucks).
AmResearch Sdn Bhd (AmResearch) said the acquisition was positive as it will enable Berjaya Food to further explore potential business opportunities such as fast-moving consumer goods and distribution rights given Starbucks’ strong global franchise value.
Additionally, the acquisition will help Berjaya Food to capitalise on Starbucks’ exponential growth with 173 outlets througout the country.
AmResearch forecasted Berjaya Starbucks to be the key revenue driver for Berjaya Food from financial year 2015 (FY15) onwards given the profitable business and the enlarged earnings base due to the full consolidation of accounts as well as the coffee franchise business’ strong same-store sales (SSS) growth.
It observed Berjaya Starbucks’ target expansion of 25 new outlets per year through openings in malls or stand-alone shops and petrol kiosks is achievable.
Berjaya Food’s acquisition of BStarbucks is expected to be completed by September. Thus, AmResearch forecasted for contributions into Berjaya Food to witness five months of equity accounting through its remaining of 50 per cent stake.
At the same time, AmResearch also upgraded the earnings forecast of Berjaya Food following the acquisition of the equity interest in Berjaya Starbucks.
The research firm believed that Berjaya Starbucks will command a higher percentage of revenue accounting for 54 per cent of Berjaya Food’s turnover followed by Kenny Rogers Roaster Malaysia at 27 per cent in FY15
Analyst Tan Ee Zhio said, “We now expect (Berjaya Food) FY15 earnings to (potentially) rise to RM32 million from RM23 million in FY14, an increase of 39 per cent and further expand to RM53 million, an increase of 66 per cent in FY16 to reflect the 100 per cent contribution of Starbucks business.
“The acquisition will be funded through borrowings. Post acquisition, gearing remains healthy at 0.7 times with an annual budgeted capital expenditure (capex) of RM40 million. “We project higher dividends of 5.3 sen and 6.3 sen (per share) in FY15 and FY16 respectively,” Tan said.
Similarly, AmResearch said Starbucks’ franchise right will be extended until 2039 from 2024 currently after the acquisition by Berjaya Food.