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PhillipCapital analyst Terence Chua says he sees a “more positive outlook” on food court operator Koufu as Singapore moves to an endemic state with the Covid-19 virus.

In a report dated September 6, Chua says he expects Koufu to report an improved footfall at its outlets as more measures look set to be lifted in a calibrated manner, including a further relaxation on dining-in limits.

Working from home may also no longer be the default arrangement, which could contribute to Koufu’s revenue.

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In FY2022, Chua adds that he expects to see cost synergies in the group as Koufu’s supply chain and logistics will be strengthened together with a broadening and expansion of its production capabilities at its new integrated facility.

The group, in April, obtained its temporary occupation permit (TOP) for its integrated facility, which is expected to commence operations progressively.

As this is expected to lead to higher productivity and product margins, Chua has raised his PATMI estimates for FY2022 by 1% to account for some of these cost-savings.

In the 1HFY2021 ended June, Koufu reported earnings of $9.9 million, nearly four times the $2.5 million reported in the corresponding period the year before.

Net profit stood 35% higher h-o-h as increased takeaway and delivery sales mitigated the lower footfall during Singapore’s move into the Phase 2 (Heightened Alert) measures from May 16 to June 13.

Despite the positives, Chua has maintained his “neutral” call and target price of 64 cents, which is still based on 18.5 times FY2021 price-to-earnings (P/E).

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“We remain cautious on the re-opening roadmap due to a resurgence of Covid-19 in Singapore and China. The stock could potentially be re-rated if there is further relaxation of dine-in measures and an increase in foreign travellers to Singapore,” he says.

SAC Capital, in an Aug 17 report, has maintained “buy” on Koufu with a target price of 77.5 cents.
“Our discounted cash flow (DCF)-derived target price translates into a FY2021/FY2022 P/E of 19.5 times and 15.8 times,” write the analysts.

“We maintained our FY2021/FY2022 topline estimates, with adjustments to bottomline (-7.6% / -7.9%) due to higher rental expenses and staff costs with the new businesses, and higher staff incentives in 1H; slightly offset by the lower depreciation expense.”

“We expect further h-o-h improvements in 2HFY2021, with new outlet contributions, and as Singapore moves towards an endemic state with more relaxation of limits and measures,” they add.

Koufu’s revenue for the 1HFY2021, at $105.7 million, stood at 47.0% of SAC Capital analysts Tracy Lim and Lam Wang Kwan’s forecast for the FY2021.

The slightly lower showing was attributable to the Phase Two (Heightened Alert) measures and low footfall at tertiary institutions and tourist-dependent outlets during the period.

As Singapore moves towards an endemic state, Lim and Lam are optimistic that the group will see higher footfall in its outlets.

“With the pandemic fatigue kicking in, we expect overall F&B dining in will pick up. Further, as Singapore looks to reopening its borders gradually to some countries with its travel corridor plans, we see this boding well for outlets catered towards tourists,” they write.

During the 1HFY2021, Koufu had opened one new food court and six F&B kiosks. On this, the SAC analysts estimate that the group had locked in leases at lower rental rates, lowering expenses until they get renewed.

As at 4.11pm, shares in Koufu are trading flat at 65 cents or an FY2021 P/B of 3.3 times with a dividend yield of 2.7%, according to PhillipCapital’s estimates.

Photo: Albert Chua/The Edge Singapore