2QFY6/22: A record-breaking quarter
? BFD posted its highest quarterly core net profit ever in 2QFY6/22 of RM38.6m, bringing its 1HFY22 results to RM50.5m, above our expectations.
? The better-than-expected earnings were due to: i) stronger SSSG and higher store count, ii) KRR turning profitable, and iii) product innovations.
? Reiterate Add as we expect BFD to remain a strong proxy for the recovery in consumer activities with a higher TP of RM4.40 (19x CY23F P/E).
Strongest quarterly performance in the group’s history in 2QFY6/22
Berjaya Food (BFD) posted a record-breaking quarter in 2QFY6/22 with its core net profit surging almost three-fold to RM38.6m (2QFY6/21: RM13.1m) while its revenue grew to RM272.8m (+56.7% yoy). We believe this was primarily driven by: i) robust recovery in consumer footfall upon reopening of economic activities since 11 Oct 2021, when interstate travel was allowed, ii) pent-up demand along with major festive sales and Christmas holidays driving sales of higher-margin Starbucks drinks and merchandise, iii)
Kenny Rogers Roasters operations turning profitable on higher customer dine-in sales upon relaxation of dine-in and social restrictions, and iv) improved cost efficiencies.
1HFY6/22 stellar earnings were above our expectation
As a result, the group’s 1HFY6/22 core net profit more than doubled to RM50.5m (+105% yoy), which beat our and consensus expectations, accounting for about 83% and 87% of full-year FY22 forecasts, respectively. Moving forward, we expect the earnings momentum in 2HFY6/22 for the group to be robust on the back of the Chinese New Year festive sales and Hari Raya Aidilfitri celebrations as well as its accelerated store expansion plan to drive growth. BFD also announced a second interim DPS of 1.0 sen/share, bringing 1HFY6/22 DPS to 2.0 sen/share (14.2% dividend payout).
Positive outlook from KRR turnaround and Starbucks expansion
We gathered that the group registered solid positive double-digit SSSG across all of its business operations. Apart from the strong rebound in consumer footfall, we believe the group’s continuous product innovations, such as new plant-based drinks, and exclusive designer brand-inspired merchandise at Starbucks as well as menu enhancements at Kenny Rogers Roasters were pivotal in driving earnings growth. In our view, these measures allowed the group to increase average transaction sizes, aiding margin expansion. Total store count for Starbucks and KRR Malaysia were 347 and 69, respectively, as at end-2QFY22 as the group managed to open 12 net new Starbucks stores in 2QFY22, on track to meet its target of 35-40 new Starbucks outlets in FY22F.
A strong consumer play; reiterate Add with a higher TP of RM4.40
In line with our EPS upgrade on higher margin assumptions, our TP rises to RM4.40 (19x CY23F P/E, a 30% discount to its average P/E since its listing in 2011) as we roll over our valuation base year to CY23F. We like BFD: i) for Starbucks’s sturdy brand equity, ii) as a strong consumer recovery play, and iii) for its robust earnings growth profile.