Maintain BUY with higher TP of MYR5.70
BFD’s results exceeded our/consensus expectations given stronger-than
expected sales and operating margins during CNY. Sequential earnings
should fare stronger in light of Malaysia’s transition into an endemic
phase on 1 Apr 2022. Hence, our FY22-FY24 earnings estimates are lifted
by 21%-26%. Maintain BUY with a higher TP of MYR5.70 as we peg BFD to
a higher FY23 PER of 20x (mean; 14x FY23 PER previously [-0.5SD to
mean]) to reflect its normalised business conditions post-pandemic.
Earnings surprised
3QFY22 core net profit of MYR32m (+172% YoY, -24% QoQ) brought
9MFY22 core net profit to MYR85m (+139% YoY), above expectations at
92%/102% of our/consensus full-year earnings estimates. The beat was
mainly due to stronger-than-expected sales and operating margins during
the Chinese New Year (CNY) period. BFD also declared a third interim
DPS of 1.5sen (YTD: 3.5sen; 9M21: 3.0sen).
SSSG: Starbucks: +20% YoY; KRR Msia: +30% YoY
BFD’s 3Q22 revenue grew 35% YoY largely on increased sales from relaxed
movement restrictions, reopening of interstate borders and CNY
festivities. EBIT also grew 104% YoY on the back of higher margin product
sales (eg. seasonal drinks) and improved contributions from Kenny Rogers
Malaysia (KRR Msia). Revenue fell 10% QoQ coming from a higher base of
pent-up demand in 2QFY22 and seasonally higher sales during the yearend school holidays. There are 345 BStarbucks stores (+2 stores QoQ,
YTD: +18 stores) and 69 KRR Msia stores (flat QoQ, YTD: -1 store) as at
end-Mar 2022.
Lifting FY22-FY24 earnings estimates by 21%-26%
We believe sequential earnings will remain strong driven by higher sales
volume from (i) Hari Raya Aidilfitri celebrations, (ii) reopening of
international borders, and (iii) extension of business hours past midnight.
Adjusting for the latest run rates, we raise our FY22/FY23/FY24 earnings
estimates by 26%/21%/21%. Our DPS estimates have also been raised to
5sen/6sen/6sen (from 4sen p.a. previously).