 |
| Capturing the Food Dream |
Let’s
get some facts straight about Berjaya Foods Berhad (BJF) first.
Number
of Kenny Rogers Roasters (KRR) restaurants-88
BJF-owned
-67
Franchisee-owned-10
Indonesia-11
Same
store sales growth is 8% per annum.
For
current FY13F, three new restaurants have started operations-namely at Paradigm
Mall, Setia City Mall and Shaftsbury Square.
 |
| Wholesome Restaurant Experience |
Six
more will open soon and BJF is on a look-out for locations to open another 6 to
attain its targeted 15 new outlets per annum.
In
Indonesia, BJF has opened three new KRR outlets in Indonesia in Jakarta. It has
been confirmed that 4 will open up in Medan and another 4 in Surabaya. BJF’s
management expects to break even in Indonesia after it exceeds a threshold
number of 20 restaurants by FY13. It is estimated each restaurant will conservatively
yield a revenue stream of between RM600K-RM900K.
BJF will
also get into drive-in way with its first drive-through service in the upcoming
stand-alones
in Setia Tropika and Kota Kemuning within the next 6 to 9 months.
Nevertheless,
for the time being, expansion remains focused on retail malls and subsequently, branching
into standalones. Additionally, management is gradually growing the delivery, Roasters On The Move (mobile restaurant)
and catering segments (<10% of revenue) via active marketing and
advertising.
Though
average ticket size for KRR is around RM40 – almost equivalent to Pizza Hut, it
is reckoned that it is unlikely to affect KRR’s business model as it targets
the niche market – middle-income consumers – and advocates a well-balanced
eating lifestyle. (For comparison: fast food chains like McDonalds and KFC are
about circa RM15)
Another
development area for BJF is the Middle-east focusing on Qatar.
Now,
let us look at BJF’s acquisition trail-adding Starbucks to the revenue sheet.
The business of BStarbucks is
complementary to that of BJF. BStarbucks is in the business of
providing quality food and
beverage to niche and premium markets, catering towards discerning
consumers. It is envisioned that taking in BStarbucks BJF’s
wings will contribute positively to its
future earnings on the basis of the generally positive economic climate and the
demands of discerning consumers for quality food and beverage which BStarbucks
is in a position to render given the locations of its stores, branding of its
products and services, etc.
 |
| Cool Delights! |
To date, BStarbucks has 119
Starbucks stores located throughout Malaysia and its revenue has been growing
from RM116 million for the FYE 30 April 2009 to RM145 million for the FYE 30
April 2011 whilst its profits have accordingly improved from a loss of RM1.1 million
in the FYE 30 April 2009 to a PAT of RM4.2 million in FYE 30 April 2010 and its
PAT further increased to RM10.6 million in FYE 2011. Based on the past
performance of BStarbucks and barring any unforeseen circumstances, BStarbucks
expects the improvement of its revenue and earnings to continue in the future.
The BStarbucks
acquisition is likely to be completed by August 2012. Unbelievably, same store
sales (SSS) for Starbucks is 26% for the first 6 months of 2012-the highest
ever within South-east Asia!
The
proposed acquisition of a 50% stake in Berjaya Starbucks is expected to be
completed by early August. Starbucks achieved SSS growth of 26% in the last six
months – the highest within Southeast Asia.
Starbucks
in Taman Tun Dr Ismail is premised on a different concept, consisting of three storeys,
where two conference rooms occupy the third floor priced at RM50/hour per room.
This is the first such concept outlet in Malaysia. Nonetheless, depending on
the suitability of location, BJF is unlikely to open another Starbucks of a
similar concept, moving forward.
More
importantly, earnings are on an upward trend, accompanied by a growing number
of restaurants, improved product offerings and higher margins from a new menu.
Not forgetting, earnings are expected to rise further from the proposed
acquisition of Starbucks. Given the strong franchise value, earnings CAGR of
51% remains robust over FY13F-FY15F.
The BFood Group principally
operates in the food and beverage industry in Malaysia. The business
of BStarbucks is complementary to
that of BJF’s Group, as BStarbucks is in the business of
providing quality food and
beverage to niche and premium markets, catering towards discerning
consumers.
BJF is of the opinion that the BStarbucks
acquisition will contribute positively to the future
earnings of the BJF Group, on the
basis of the generally positive economic climate and the
demands of discerning consumers
for quality food and beverage which BStarbucks is in a position to provide given the locations of
its stores, branding of its products and services, etc.
For information purposes only, to
date, BStarbucks has 119 Starbucks stores located throughout Malaysia and its revenue has been
growing from RM116 million for the FYE 30 April 2009 to RM145 million for the FYE 30 April 2011
whilst its profits have accordingly improved from a loss of RM1.1million in the FYE 30 April 2009
to a PAT of RM4.2 million in FYE 30 April 2010 and its PAT further increased to RM10.6 million in
FYE 2011. Based on the past performance of BStarbucks and barring any unforeseen circumstances,
BStarbucks expects the improvement of its revenue and earnings to continue in the future.
While
Amwatch has downgraded BJF to a HOLD, with an unchanged fair value of M1.45/share
pegged to a 13x PE on CY13F earnings, given a limited potential upside, the share
price which has performed well (+39% since our initiation report on 25 May
2012), continued to attract buyers pushing the price to touch RM1.45 by mid
morning on 3 July 2012 before stabilizing to close at RM1.38 for the day.
Let us
watch what will its price be as it draws to its ex-date on 12 July 2012.
The general
perception is BJF’s earnings trajectory remains strong, supported by a greater
certainty in growth as its expansion spree remains well on track especially on the
impending acquisition of BStarbucks which will lift
its earnings portfolio.
