Lower Coffee ASP May Offset Slower Sales For Berjaya Food, Said Maybank IB

Sales momentum for Berjaya Food (BFD) is expected to be lacklustre in quarter four financial year 2023 due to seasonally weaker sales during Ramadan. However, lower coffee average selling prices in quarter four financial year 2023 may partially offset slower sales momentum in sequential quarters, said Maybank Investment Bank Bhd (Maybank IB) in a recent report.

Product demand for Berjaya Starbucks (BStarbucks) remains strong, but meaningful earnings improvement will have to be attained through stringent cost management.

“We maintain our earnings estimates but lower financial year 2024 estimate-financial year 2025 estimate dividend per share estimates to 2sen per annum. With 29% upside to our unchanged target price of RM0.72, we upgrade BFD to Buy,” said Maybank IB.

Quarter four financial year 2023 sales volume should be seasonally softer quarter on quarter given the Ramadan period where sales typically decline 20%-30% month on month. Store footfall has been stable but slight down-trading trends are emerging as the number of smaller-sized beverage orders increase.

“BFD is required to purchase 60% of its raw materials from Starbucks International and raw material average selling prices are adjusted on a quarterly basis in USD. BFD does not do any forex hedging,” said Maybank IB.

Management has shared that its coffee average selling prices have softened in quarter four financial year 2023 and believes that raw material costs peaked in quarter three financial year 2023.

BFD’s largest raw material component is coffee, followed by milk, which is sourced locally. Separately, after its RM1/beverage price hike in Nov 2022, the group does not plan to raise product prices any further for now given subdued consumer sentiment.

BFD plans to open another 14 BStarbucks stores in quarter four financial year 2023 to bring total BStarbucks stores to 387 stores in financial year 2023.

With demand remaining stable, the group believes it can open another 40 to 45 BStarbucks stores in financial year 2024 along with 5 Paris Baguette (PB) stores per annum.

There are 2 PB stores presently located in Pavilion KL & Bukit Jalil. BFD is required to open at least 25 BStarbucks stores per annum. based on its agreement with Starbucks International.

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