RHB Research has maintained a Buy Recommendation for Berjaya Food with a target price of RM2.64, with 23% upside from its previous price of RM2.55.
RHB said that Berjaya Food could surprise on the upside with stronger-than-expected 2QFY22F (Jun) results.” Essentially, we believe its underlying fundamentals have improved, thanks to the implementation of effective strategies – evidenced by resilient earnings and margin expansion during the pandemic, “the stockbroking house said.
It said that trading at 14x FY22F P/E, or below its 5-year mean, the valuation is attractive, considering its sustainable earnings growth, established brand equity of Starbucks, and solid execution by management
The research house said that BFD is set to release its 2QFY22F results on 10 Feb. We believe it could spring a positive surprise by reporting stellar results.
It said that this is in consideration of the overwhelming consumption trends management has observed, driven by pent-up demand following the broad economy reopening, and further boosted by year-end festivities.
“Looking beyond the seasonality factor, in essence, the underlying fundamentals of the business have improved thanks to the sound business strategies tailored by management for the respective brands,” it said.
RHB said that BFD exhibited a high degree of earnings resiliency despite the rolling lockdowns in the past two years.
“Starbucks has seen a surge in sales from alternative channels including drive-through and delivery to offset the shortfall in dine-in sales. We highlight the strategy to focus on drive-through formats since a few years ago has borne fruit – sales contribution has grown to 23% and operating margin has expanded from 12.6% in FY18 to 17.4% in 1QFY22,” it said.
The stockbroking house t said that Starbucks is relatively unperturbed by the hike in commodity prices, unlike most of the consumer peers. “The pricing of the coffee bean requirement is fixed thanks to the global procurement from contract farmers by Starbucks US, whereas the higher costs for other raw materials are manageable so far,” it said.
