KUCHING: Berjaya Food Bhd’s (BFood) third quarter of the financial year 2019 (3QFY19) exceeded expectations as its performance was lifted by the recent festive season.
In a report, the research team at AmInvestment Bank Bhd (AmInvestment) pointed out that BFood’s first nine months of FY19 (9MFY19) net profit exceeded expectations and as such, it expected the group’s earnings to grow 59 per cent for FY19 forecast, driven by the stellar Starbucks brand.
It said, BFood’s 9MFY19 core net profit surged 41.9 per cent y-o-y to RM22.3 million due to Starbuck’s 4.5 per cent y-o-y improvement in SSSG, higher store count of 282 and cessation of the consolidation of KRR Indo’s loss-making operations.
“BFood’s 3QFY19 strong performance was attributed to year-end festive promotions, school holidays and the Christmas season which boosted both beverages and merchandise sales. ‘
“3QFY19 revenue grew 8.4 per cent q-o-q and 9.8 per cent y-o-y as Starbucks Malaysia achieved an eight per cent SSSG growth coupled with a 2.5 per cent SSSG growth in KRR due to the successful promotional period,” it added.
Comparing 9MFY19 against 9MFY18, it noted that BFood’s topline rose six per cent on the back of a strong 3Q performance as well as an additional 27 Starbucks stores, bringing the total number of outlets to 282 (vs. 255 in 9MFY18).
“Starbucks’ 9MFY19 revenue increased 11.5 per cent while KRR’s dropped 11.3 per cent. Starbucks’ stellar performance was due to its successful promotions further buoyed by its 20th anniversary celebration promotions and a more popular merchandising,” the research team said.
Aside from that, it noted that BFood’s 9MFY19 earnings before interest, tax, depreciation, and amortisation (EBITDA) climbed 14.1 per cent y-o-y while EBITDA margin improved 1.1ppts to 15.2 per cent.
It believed that that this was on the back of lower coffee prices and a stronger ringgit against the dollar.
“The growth was enhanced by KRR’s turnaround in 3QFY19 where it achieved EBIT of RM0.05mil (down RM2.7 million in 9MFY19 and down RM3.3 million in 9MFY18),” it added.
All in, AmInvestment maintained its ‘buy’ call on the stock.
It explained: “We believe BFood will continue to perform into 4QFY19 albeit at a slowermomentum comparedwith 3QFY19 as 3Q is typically the company’s seasonally strongest quarter. In our forecast for FY20F, we estimate SSSG of 4.3 per cent and EBITDA margin of 13.5 per cent.”
It noted that key risks to its forecast include store expansion delays, slower-than-expected turnaround of KRR and a sharp appreciation in raw materials costs.