|Amresearch maintains strong Buy on BFood, raises fair value to RM1.55|
|Business & Markets 2012|
|Written by Shalini Kumar of theedgemalaysia.com|
|Monday, 10 December 2012 16:10|
KUALA LUMPUR (Dec 10): Amresearch has maintained its strong Buy rating on Berjaya Food Berhad (BFood) at RM1.28 and raised its fair value to RM1.55 per share from RM1.40 previously, following the company’s latest acquisition of Singapore-based Jollibean Foods Pte Ltd (JFPL).
In a note Monday, the research house said it viewed the acquisition as a positive step as it further strengthens the group’s position as a regional F&B player.
“Not only does the group have presence in Malaysia and Indonesia, it just made its maiden footprint into Singapore. Further out, the group plans to grow the Jollibean brand in Malaysia and China mainly be based on licensing.” the research house said.
Management intends to open five new outlets for any brand under JFPL per annum.
Amresearch estimates JFPL will generate at least SGD750.000 in profit before tax in FY13 and this was expected to grow Bfood’s earnings by 97% to RM22 million, including Starbucks’ nine months contribution.
Jollibean’s operations in Malaysia and China are anticipated to commence in FY14.
On the back of 50 Jollibean kiosks each in Malaysia (5 company owned, 45 licensee-owned) and China (solely on licensing), earnings are expected to rise by 65% in FY14F.
However, capital expenditure (capex) for licensed-kiosks are fully borne by the licensees as part of their investment costs.
“Given BFood’s strong balance sheet and cash cushion of RM42mil as at end-1QFY13, the acquisition was funded by 100% internal cash. This continues to put the group in a zero borrowing position.” added Amresearch.
Having said that, management highlighted lower dividends for FY13F as the group is gearing up for expansion.
Amresearch has lowered its dividend per share assumption to 2.0 sen, translating into a dividend yield of 1.6%.
Dividends are expected to revert to at least 40% of earnings from FY14F onwards.
The research house maintains its bullish conviction in BFood for its bright outlook - driven by a greater F&B portfolio of brands, exposed to different geographies, healthy 3-year earnings CAGR of 57% and improving cash flow.
“We believe BFood deserves a premium against the current valuation of 12x FY14F PE, which is at a 25% discount to its global food peers.” it said.