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Monday, August 22, 2016

BFood rallies over 14% after Maybank IB upgrades the counter to 'buy'

BFood rallies over 14% after Maybank IB upgrades the counter to 'buy'
By Chester Tay / theedgemarkets.com | August 22, 2016 : 4:17 PM MYT

KUALA LUMPUR (Aug 22): Berjaya Food Bhd (BFood)’s share price rose as much as 14.17% to RM1.45 today, after Maybank IB Research upgraded its call on the counter to a 'buy', from 'hold'.

At 3.21 p.m., the stock was trading at RM1.42, up 15 sen or 11.81%, with 4.61 million shares done; it was also the sixth top gainers across Bursa Securities.

In his report to investors today, Maybank IB analyst Kevin Wong said the upgrade comes after the recent plunge in BFood’s share price, which provides a huge upside to the research house’s target price of RM1.90, which it has maintained.

BFood's counter started the week last Monday at RM1.62, but ended the week at RM1.27 on Friday.

Wong opined given BFood has “remained operationally and fundamentally stable”, the counter’s current valuation is attractive, on the back of a decent three-year compounded annual growth rate (CAGR) of 11% in net profit.

Wong also noted BFood’s management is optimistic of a single-digit same store sales growth for Starbucks in Malaysia in the first quarter ending July 31, 2016 (1QFY17), premised on sustained sales volume from matured and selected new stores.

However, he cautioned 1QFY17 earnings could be seasonally softer quarter-on-quarter, due to the Muslim fasting month in June 2016.

“Our three-year earnings per share CAGR of 11% (FY15 to FY18) is underpinned by new stores, whereby BFood is still committed to open at least 25 new Starbucks stores in Malaysia per annum until FY19,” he said.

Wong however remains cautious on Kenny Rogers’ earnings outlook, noting outlets in Malaysia and Indonesia continue to face challenges from soft consumer spending and stiff competition.

“We understand that BFood is working on various strategies to increase the appeal and sales of Kenny Rogers in Malaysia, such as promotions and new pricing. Meanwhile, management could also close more loss-making Kenny Rogers outlets in Indonesia, in the near future,” he said.

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