AmInvestment Bank updated its 'hold' from 'sell' proposal to Berjaya Food Bhd (BFood) with a higher fair value (FV) of RM1.13 compared to 78 sen previously after predicting the company would generate sales growth of more than the first quarter. ends 30 September 2020 (1QFY21) and the following period.
The research firm through its notes today has increased its BFood earnings forecast by 11% (FY21), 10% (FY22) and 9% (FY23).
AmInvestment explained that BFood received a surge in demand following the recent Restoration Movement Control Order (PKPP).
In addition, the forecast change was due to the increase in Starbucks sales since the PKPP period in addition to BFood's plans to open about 20 new branches in FY21.
AmInvestment also expects better sales growth especially from Kenny Rogers Roasters (KRR) which is forecast to reap positive profit after tax on FY21.
In fact, BFood has closed 14 KRR branches that did not reach the set level at FY20 and the action helped reduce operating costs.
Furthermore, BFood plans to open 10 small KRR branches following the increase in ‘grab-and-go’ concept stores among consumers.
"This is a new norm strategy that is being studied by BFood because they believe it is more appropriate to open a small shop at this time than to open a restaurant that requires higher operating costs.
"We believe this move will contribute to the higher revenue value of KRR which is 11% from RM69 million in FY20 to RM76 million in FY21, which is about 10% of BFood's total revenue in FY21," the firm said.
