A record-breaking quarter in 4QFY22
- BFood’s FY6/22 net profit of RM126.3m (+137.0%) was above our and consensus expectations due to stronger-than-expected sales in 4QFY22.
- We project a yoy decline in earnings going into FY23F due to weaker consumer discretionary spending power as well as higher cost pressures.
- Reiterate Hold as BFood’s valuation largely prices in the weaker prospects.
Record 4QFY6/22 core net profit (CNP) rose 129.2% yoy to RM40.7m
Berjaya Food Berhad’s (BFood) 4QFY6/22 revenue grew 61.2% yoy to RM291.3m. We are of the view that the record 4QFY22 sales for BFood were mainly boosted by Raya festive celebrations and the complete removal of movement restrictions, leading to higher consumer footfall and longer operating hours (i.e. more BStarbucks stores operating 24 hours), as well as 11 new BStarbucks store openings during the quarter. Same-store-sales growth (SSSG) for BStarbucks and Kenny Rogers ROASTERS (KRR) was c.65% yoy and c.90% yoy, respectively, in 4QFY22.
FY6/22 CNP jumped 137.0% yoy to RM126.3m, above expectation
FY6/22 revenue increased 39.1% yoy to RM997.7m, primarily driven by strong SSSG for Starbucks Malaysia (BStarbucks) and KKR at c.35-40% in FY22 on the i) ability to capture major festive sales (i.e. Christmas, Chinese New Year, and Raya) with lifting of movement restrictions, ii) longer operating hours, and iii) higher BStarbucks store count (+3.2% yoy). FY22 EBITDA margin was also higher at 34.2% (+1.5% pts yoy), aided by higher average transaction sizes with a larger number of drive-through stores (c.21% of total BStarbucks stores). BFood’s FY6/22 results were above expectations at 118.9%/112.1% of our/Bloomberg consensus FY22 estimates. DPS of 5.5 sen was also above expectation.
We expect BFood to record a yoy decline in earnings in FY23F
Going forward, we are pricing in a weaker earnings outlook for BFood on margin compression as we believe its transaction sizes could decline post pent-up demand period, leading to lower economies of scale. This is in addition to higher input cost pressure (e.g. chicken, milk, coffee, creamer and sugar) owing to elevated commodity prices and higher operating expenses (due to minimum wage hike) placing pressure on margins. Weaker discretionary spending sentiment in 1HFY23 could dampen BFood’s sales demand as well amidst a high inflationary environment and interest rate hike cycle, in our view.
Reiterate Hold with a higher TP of RM4.55
We retain our Hold call on BFood in view of the weaker operating environment in 1HFY23F onwards, albeit with a higher TP of RM4.55 (18x CY23F P/E, in line with its historical five year mean P/E) as we raise our FY23-24F EPS forecasts on the earnings beat. However, we believe BFood’s weaker earnings prospects have been largely priced in as the stock is currently trading at 17.2x CY23F P/E, a mere discount of 4.4% to its 5-year mean P/E. We expect BFood’s share price to be supported by its strong ‘Starbucks’ brand equity and extensive retail presence with over 356 outlets in Malaysia as of end-FY22.
