CONSUMER

BERJAYA FOOD
(BFD MK EQUITY, BJFO.KL) 10 Feb 2021

Cost management coming into fruition in 1HFY21

Company report BUY
AmInvestment Bank (Upgraded)
www.amequities.com.my
03-2036 2372 Rationale for report: Company results

Investment Highlights
Price RM1.51
Fair Value RM1.72
52-week High/Low RM1.83/RM1.00  We upgrade our call on Berjaya Food (BFood) from HOLD
to BUY with a higher fair value of RM 1.72/share (from
Key Changes RM1.25/share previously). Our fair value of RM1.72/share
Fair value  is based on a PE of 17x on FY22F EPS of 10.1 sen.
EPS 
 We believe that BFood would benefit from the easing of
YE to Jun FY20 FY21F FY22F FY23F the movement restriction order in mid-February 2021. Our
PE of 17x is roughly the same as BFood’s two-year
Revenue (RM mil) 632.9 756.4 870.7 936.3
average PE.
Core net profit (RM mil) (19.6) 35.0 38.7 44.7
FD Core EPS (sen) (5.1) 9.2 10.1 11.7
FD Core EPS growth (%) (180.1) (279.2) 10.5 15.5  BFood’s 1HFY21 core net profit of RM21.5mil was a
Consensus Net Profit (RM mil) - 27.9 32.3 36.0 surprise and came above expectations, meeting our full-
DPS (sen) 2.0 1.0 2.0 4.0 year estimates whilst making up 77% of consensus
PE (x) nm 16.5 14.9 12.9 estimates. This was due to the group’s lower-than-
EV/EBITDA (x) 5.7 3.7 3.4 3.3 expected operational expenses from the effective cost
Div yield (%) 1.3 0.7 1.3 2.6
management measures implemented during the height of
ROE (%) (5.6) 10.0 10.2 10.9
Net Gearing (%) 85.3 86.1 66.0 55.5
the pandemic.

Stock and Financial Data  BFood has also declared a second interim dividend of
0.5sen/share, bringing total dividends for 1HFY21 to
Shares Outstanding (million) 358.6 1.0sen/share. We forecast BFood to declare another
Market Cap (RM mil) 541.5 dividend of 1.0sen/share in 2HFY21.
Book Value (RM/share) 0.89
P/BV (x) 1.7  We raise our earnings forecasts for FY21F, FY22F and
ROE (%) (5.6) FY23F by 64%, 38% and 35% respectively to account for a
Net Gearing (%) 85.3 strong recovery coming out of the pandemic. We have also
accounted for higher-than-expected sales and operating
Major Shareholders Berjaya Corporation (53.7%)
Tan Chee Yioun (5.3%)
profit margin resulting from the cost rationalization
DBS Group (5.2%) initiatives. The positive impact of the cost streamlining
Free Float 113.5 measures is finally coming into fruition. Also, KRR is
Avg Daily Value (RM mil) 0.3 expected to break even by end-FY21F.

Price performance 3mth 6mth 12mth  BFood’s 2QFY21 revenue of RM174.1mil was down 5%
YoY vs. RM184.1mil in 2QFY20. This was due to the lower
Absolute (%) 31.3 36.0 23.8 footfall in stores as customers continued to avoid going
Relative (%) 26.2 35.4 21.3
out and spending on discretionary goods. BFood also
closed certain non-performing stores during the period.
2.5 2,000
1,800  Starbucks posted a revenue of RM151mil, down 5% YoY in
2.0 1,600 2QFY21 while KRR’s revenue decreased significantly by
1,400 42% to RM13.4mil. The decline in Starbucks’ revenue was
1.5 1,200 due to the lower footfall at the stores but this was slightly
1,000 offset by sales in the drive-through outlets. As most of
1.0 800 KRR stores are located in shopping malls, KRR’s revenue
600
was dragged by the reduced footfall. As a result, SSSG for
0.5 400
Starbucks and KRR was -3.5% and -30% respectively.

0.0
200
0
 On a QoQ basis, sales were flattish in 2QFY21 with weaker
Feb-16 Feb-17 Feb-18 Feb-19 Feb-20
revenue in all segments as a result of lower footfall.
BFood’s revenue slid 3.7% QoQ in 2QFY21 whereas
BFD MK FBMKLCI Index
Starbucks and KRR’s declined 3.5% and 23% respectively.
On the other hand, the Singaporean operations, which run
Jollibean, saw revenue rising by 12% from RM4.5mil to
RM5mil. Store count for Starbucks at end-2QFY21 was 325
(+3 stores) while KRR’s was unchanged at 71.
 Berjaya Food 10 Feb 2021

 Moving forward, we believe BFood’s sales growth would be driven largely by the recovery in SSSG as the Covid-19
situation improves and opening of new Starbucks stores. Earnings in 2HFY21 are expected to remain rather volatile
due to the reimplementation of the MCO in all states except Sarawak starting 13 January which will affect sales in the
third quarter. However, with the easing of the MCO and roll-out of the national vaccination programme at the end of
February, we expect to see an improvement in consumer sentiment and a gradual recovery in customer activity, which
will result in a pick-up in sales.

EXHIBIT 1: BERJAYA FOOD RESULTS REVIEW

QoQ YoY YoY
YE Jun 20Q2 21Q1 21Q2 (%) (%) 1H20 1H21 (%)
Revenue 184.1 180.7 174.1 -3.7 -5.4 364.6 354.8 -2.7
EBITDA 51.7 55.2 54.9 -0.5 6.2 95.9 110.1 14.9
Depreciation -31.6 -30.7 -29.8 -2.9 -5.5 -60.0 -60.5 0.9
EBIT 20.2 24.5 25.1 -2.4 24.4 35.9 49.6 38.2
Interest expense -7.1 -7.4 -7.8 6.3 10.5 -14.3 -15.2 6.2
Interest income 0.1 0.0 0.1 12.5 -28.0 0.2 0.1 -39.6
Pretax profit 13.1 17.0 17.3 -1.8 31.6 21.7 34.3 58.0
Taxation -5.1 -6.6 -5.9 -10.5 15.5 -9.1 -12.5 37.5
Minority interest 0.0 0.0 -0.3 0.0 -0.2
Net profit - Basic 8.0 10.4 11.1 7.2 38.8 12.6 21.5 70.6

Core EPS - Diluted (sen) 2.2 2.9 3.1 -6.8 39.7 2.9 6.0 106.9
Gross DPS (sen) 1.0 0.5 0.5 NM -50.0 0.5 0.5 0.0

EBIT margin (%) 11.0 13.6 14.4 0.9 3.5 9.8 14.0 4.1
Pretax margin (%) 7.1 9.4 9.9 0.5 2.8 5.9 9.7 3.7
PAT margin (% ) 4.4 5.8 6.4 0.6 2.0 3.5 6.1 2.6
Effective tax rate (%) 39.0 38.9 34.2 -4.7 -4.8 -42.0 36.6 78.6

Segmental revenue
Malaysia 176.2 174.7 167.2 -4.3 -5.1 348.8 341.9 -2.0
Sbucks 153.0 156.5 151.0 -3.5 -1.3 304.0 307.5 1.2
KRR 23.0 17.4 13.4 -23.0 -41.7 42.0 34.4 -18.2
Singapore 6.2 4.5 5.0 12.1 -19.5 12.5 9.5 -23.9
Others 1.7 1.6 1.9 18.3 11.4 1.6 3.4 118.3

Segmental earnings
Malaysia 21.3 24.6 24.7 -0.3 15.6 24.6 49.2 100.3
Sbucks 21.0 24.7 34.5 -39.7 64.3 38.0 59.2 55.8
KRR 0.4 0.5 0.4 30.0 0.0 -0.6 -10.0 1562.8
Singapore -0.7 0.2 -0.1 -161.8 84.8 0.2 0.1 -61.8
Others 0.1 0.3 0.6 104.3 -369.4 0.3 0.8 204.3

Segmental margins
Malaysia (%) 12.1 14.1 14.7 0.7 2.6 14.1 14.4 0.3
Sbucks 13.7 15.8 22.8 7.1 9.1 12.5 19.3 6.8
KRR 1.5 2.9 2.6 -0.3 1.1 -1.4 -29.0 -27.6
Singapore (%) -11.3 3.9 -2.1 -6.0 9.1 3.9 0.7 -3.2
Others (%) 7.2 17.6 30.5 12.8 23.2 17.6 24.6 6.9

Store count
Starbucks Malaysia 309 322 325 3 16
KRR Malaysia 81 71 71 0 -10
Jollibean 31 33 33 0 2
Source: Company, AmInvestment Bank Bhd

AmInvestment Bank Bhd 2

 0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
May-16
Aug-16
Nov-16
Berjaya Food

Feb-17
May-17
Aug-17
Nov-17
Feb-18
May-18
Aug-18

AmInvestment Bank Bhd

Nov-18
Feb-19
May-19
Aug-19
Nov-19
EXHIBIT 2: PB BAND CHART

Feb-20
May-20
Aug-20
Nov-20
Feb-21
-1δ
Avg
+1δ

-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00

May-16
Aug-16
Nov-16
Feb-17
May-17
Aug-17
Nov-17
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Aug-19
EXHIBIT 3: PE BAND CHART

Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
Avg
+1δ

-1δ
10 Feb 2021

3
Berjaya Food 10 Feb 2021

EXHIBIT 4: FINANCIAL DATA

Income Statement (RMmil, YE 30 Jun) 14MFY19§ FY20 FY21F FY22F FY23F

Revenue 789.0 632.9 756.4 870.7 936.3

EBITDA 113.4 143.7 232.2 237.7 239.1
Depreciation/Amortisation (48.7) (118.1) (141.0) (134.9) (130.0)
Operating income (EBIT) 64.7 25.6 91.2 102.8 109.1
Other income & associates - - - - -
Net interest (18.1) (34.1) (40.5) (38.4) (35.4)
Exceptional items - - - - -
Pretax profit 46.6 (8.5) 50.7 64.4 73.7
Taxation (22.4) (11.6) (15.7) (25.7) (29.0)
Minorities/pref dividends 0.2 0.5 - - -
Net profit 24.4 (19.6) 35.0 38.7 44.7
Core net profit 24.4 (19.6) 35.0 38.7 44.7

Balance Sheet (RMmil, YE 30 Jun) 14MFY19§ FY20 FY21F FY22F FY23F

Fixed assets 275.5 286.0 290.3 293.9 296.8

Intangible assets 459.6 458.3 459.4 460.6 461.7
Other long-term assets 30.8 30.0 30.0 30.0 30.0
Total non-current assets 765.9 774.3 779.8 784.5 788.6
Cash & equivalent 22.5 27.2 (16.3) 23.0 35.4
Stock 37.2 42.5 30.8 36.6 39.4
Trade debtors 27.4 22.6 24.8 28.5 30.7
Other current assets 3.9 10.9 10.9 10.9 10.9
Total current assets 90.9 103.2 50.2 99.1 116.4
Trade creditors 116.3 128.4 79.5 94.4 84.2
Short-term borrowings 161.1 190.1 192.0 193.9 195.8
Other current liabilities 72.8 82.5 82.5 82.5 82.5
Total current liabilities 350.2 401.0 354.1 370.8 362.5
Long-term borrowings 127.4 121.0 105.3 90.5 75.5
Other long-term liabilities 12.7 12.6 12.6 12.6 12.6
Total long-term liabilities 140.1 133.7 118.0 103.1 88.2
Shareholders’ funds 365.3 333.0 364.3 395.7 425.5
Minority interests 1.2 0.4 0.4 0.4 0.4
BV/share (RM) 0.97 0.89 0.97 1.05 1.13

Cash Flow (RMmil, YE 30 Jun) 14MFY19§ FY20 FY21F FY22F FY23F

Pretax profit 46.6 (8.5) 50.7 64.4 73.7

Depreciation/Amortisation 48.7 118.1 141.0 134.9 130.0
Net change in working capital 154.9 173.3 (39.4) 5.3 (15.2)
Others (72.1) (136.8) 24.8 12.7 6.4
Cash flow from operations 178.1 146.1 177.1 217.4 194.9
Capital expenditure (86.6) (52.0) (112.5) (112.5) (112.5)
Net investments & sale of fixed assets (5.3) (4.0) (5.1) (5.1) (5.1)
Others 0.8 0.3 0.1 0.2 1.2
Cash flow from investing (91.1) (55.7) (117.5) (117.4) (116.4)
Debt raised/(repaid) 8.2 21.2 (14.6) (14.6) (14.6)
Equity raised/(repaid) 0.3 0.1 0.1 0.1 0.1
Dividends paid (14.7) (10.7) (3.8) (7.5) (15.0)
Others (49.5) (105.3) (84.7) (38.6) (36.6)
Cash flow from financing (55.6) (94.6) (102.9) (60.6) (66.1)
Net cash flow 31.3 (4.2) (43.3) 39.4 12.4
Net cash/(debt) b/f 28.8 14.0 18.7 (24.7) 14.7
Net cash/(debt) c/f 60.1 9.8 (24.7) 14.7 27.1

Key Ratios (YE 30 Jun) 14MFY19§ FY20 FY21F FY22F FY23F

Revenue growth (%) 23.3 (19.8) 19.5 15.1 7.5

EBITDA growth (%) 53.3 26.8 61.6 2.4 0.6
Pretax margin (%) 5.9 (1.3) 6.7 7.4 7.9
Net profit margin (%) 3.1 (3.1) 4.6 4.4 4.8
Interest cover (x) 3.6 0.8 2.3 2.7 3.1
Effective tax rate (%) 48.1 136.9 31.0 39.9 39.4
Dividend payout (%) 61.7 nm 10.7 19.4 33.6
Debtors turnover (days) 12 14 11 11 12
Stock turnover (days) 16 23 18 14 15
Creditors turnover (days) 43 71 50 36 35

Source: Company, AmInvestment Bank Bhd estimates

§ From this year onwards year end is Jun

AmInvestment Bank Bhd 4

Berjaya Food 10 Feb 2021

DISCLOSURE AND DISCLAIMER

This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (“AmInvestment”) without
regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty,
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time of issue. While all reasonable care has been taken to ensure that the stated facts are accurate and views are fair and
reasonable, AmInvestment has not independently verified the information and does not warrant or represent that they are
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constitute AmInvestment’s views as of this date and are subject to change without notice. Notwithstanding that, AmInvestment
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“AmBank Group”).
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AmInvestment Bank Bhd 5