RHB Research has maintained a”Buy” recommendation for Berjaya Food with higher DCF-derived MYR3.05 TP from MYR2.64, implying 27% upside and c.4% FY22F yield.
It said that has raised FY22-24F earnings by 15-28%, imputing higher sales growth assumptions. “Our new MYR3.05 TP implies a 17x FY23F P/E, which is +1SD above the 5-year mean. We ascribe a 2% ESG premium to our TP, considering BFood’s ESG score of 3.1 which is above the country median,” RHB said.
It said that Berjaya Food’s 2QFY22 results significantly beat expectations on the back of an overwhelming surge in sales, driven by pent-up demand – following the relaxation in movement restrictions and successful execution of effective business strategies.
“With the stock trading at 13x FY23F P/E or below its 5-year mean, we believe the valuation is attractive, considering BFood’s improving fundamentals and solid earnings delivery,” it said
It said that it believes the strong 2QFY22 performance was partially due to seasonality factors and pent-up demand following the drawn-out lockdown, and hence, earnings should taper off from the high base in subsequent quarters.
“That said, it should not mask the improvement in BFood’s fundamentals, driven by sound business strategies tailored by management for the respective brands. This includes the strategy to focus on drive-through formats, and the emphasis on enhancing its hospitality to facilitate upsizing and topping up, which has effectively led to higher ASPs and margins for Starbucks. The improvement is evidenced by consistent earnings delivery in the past six quarters amidst the pandemic,” RHB said.
