Friday, August 18, 2017

FW: AmBank Research - Berjaya Food : On the cusp of revival BUY, 18 Aug 2017



Berjaya Food : On the cusp of revival                                                                                                                      BUY


We come away enthused from our recent meeting with Berjaya Food’s (Bfood) new management team. The strategic direction over Bfood’s non-performing assets is constructive as we eagerly await its fruition. We upgrade our recommendation to BUY from Hold. Our higher fair value of RM1.77/share (from RM1.43/share) is pegged at a higher P/E of 25x, reflecting a 20% premium to its historical valuations from our previous P/E peg of 18x. We think that it is justified as Bfood is on the cusp of revival independent of a potential restructuring exercise, attractive growth off a low base and a stellar Starbucks brand.


Independent of the restructuring exercise, we regard Bfood on the brink of a turnaround. Over FY17, it shut the bulk of loss-making stores as KRR Malaysia, KRR Indo and Jollibean closed 10%, 30% and 30% of their total store counts respectively. Therefore, we anticipate significantly lower losses from these assets. On the other hand, Starbucks successfully navigated a 10% ASP hike in Jan 2017. Despite SSSG coming in flat for the quarter, it was still positive as the previous ASP hike in 1QFY16 saw SSSG contract 7%.


Others :

Carlsberg Brewery : 2Q17 Earnings surprise                                                                                                          HOLD

Malaysian Pacific Industries : Prospects remain bright but valuations rich                                               HOLD

Press Metal : Value-added products the way to go                                                                                           HOLD

Pos Malaysia : Strong growth sustained                                                                                                                 HOLD




George Kent, Berjaya Food,Ta Win Holdings, UMW Oil & Gas Corporation




Oil & Gas Sector  : Petronas tougher on costs, focuses more on downstream

Seacera : Seacera to work with prominent partner on RM10b project

Scomi  : Scomi mulls consolidation and restructuring

HLInd : Hong Leong Industries falls into the red on MNI impairment cost.




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