Berjaya Food Bhd (BFood) — controlled by tycoon Tan Sri Vincent Tan Chee Yioun’s conglomerate Berjaya Corp Bhd — operates the Kenny Rogers Roasters (KRR) restaurant chain, Starbucks coffee chain, soy-related beverage and snack producer Jollibean and plant-based vegan restaurant Sala. A South Korean bakery chain will soon join the line-up.
Notably, the rise in BFood’s share price — which more than doubled during the review period — not only catapulted the food and beverage (F&B) operator’s market capitalisation above the RM1 billion mark to qualify it as a member of The Edge Billion Ringgit Club (BRC), but also bagged it the BRC award for the highest returns to shareholders over three years in the consumer products and services sector.
According to the BRC methodology, BFood delivered an impressive three-year compound annual growth rate (CAGR) shareholder return of 34.5% over the review period, during which its share price gained more than 140% from RM1.56 on March 29, 2019, to RM3.79 on March 31 this year.
Data from absolutelystocks.com shows BFood’s market capitalisation had grown 1.3 times in three years, from RM589.57 million on March 29, 2019, to RM1.37 billion on March 31 this year. The company saw its market capitalisation hit the RM1 billion mark in February this year, the first time since 2015.
It should be noted that post-review period, shares in BFood continued to gain another 15% between April and mid-October. In June, BFood proposed a four-for-one bonus issue of up to 1.56 billion shares, aimed at enhancing the marketability of its shares on the Main Market and providing opportunity for greater participation among existing shareholders as well as new investors. At the time of writing, BFood had a market capitalisation of RM1.47 billion, based on its post-bonus issue adjusted share price of 84 sen.
The share price gains this year came even as BFood’s net profit soared to RM122.7 million in the financial year ended June 30, 2022 (FY2022) — the highest since the financial year ended April 30, 2015. The company changed its financial year-end from April 30 to June 30 in 2019. The stronger earnings performance was contributed by existing and newly opened Starbucks outlets in FY2022, coupled with the turnaround of KRR’s business performance.
“It was certainly a year of success and progress for the group despite facing the operational headwinds. We will continue to work hard towards sustaining our growth momentum as we enter the new financial year,” said BFood CEO Datuk Sydney Quays in a statement dated Aug 16, following the release of its FY2022 earnings.
In a research note dated Sept 26, RHB Investment Bank (RHB IB) maintained a “buy” call on BFood with a (post-bonus issue) target price of RM1.13. “We emerged from our meeting with Berjaya Food’s CEO Datuk Sydney Quays and CFO Louise Chin feeling optimistic about its prospects beyond the overplayed recovery theme. Our renewed confidence is premised on the group’s strengthened business fundamentals, strategic marketing efforts, key market positioning and robust expansion plans,” analysts Soong Wei Siang and Raja Nur Aqilah Raja Ali wrote.
They also noted that BFood’s valuations were “below-mean”, which is attractive, given its improved and solid earnings delivery post-pandemic. Downside risks to their call include weaker-than-expected consumer sentiment, and a drag in the expansion of BFood’s brands.
The RHB analysts also pointed out that BFood was still seeing pockets of opportunity for network expansion. Soong and Raja Nur Aqilah believe that, with a goal of opening 40 Starbucks outlets in FY2023, BFood’s key priority would be the drive-through store format (50% of new stores), as it has been the best-performing store format, contributing about 30% of FY2022 total revenue despite comprising only about 20% of total store count.
The group also endeavours to unlock value by opening outlets in underpenetrated suburban areas and office buildings and via a new curbside pick-up format.
BFood is also expanding its portfolio with popular South Korean bakery café Paris Baguette, which is owned by South Korea’s SPC Group. SPC has more than 4,000 stores worldwide (more than 400 in the US, China, France, Vietnam, Indonesia, Cambodia and Singapore) and had recently announced plans to develop a halal food manufacturing hub in Nusajaya, Johor. In June, BFood announced a 50:50 joint venture (aJV) with Paris Baguette Singapore, with plans to open the first such outlet in the Klang Valley by year end. With a 50% stake in the JV, BFood also has exclusive rights as the local operating licensee of Paris Baguette stores in Malaysia. Earnings contribution from this brand is expected to be minimal at this stage, considering the pace of its expansion, but success would add another feather to BFood’s cap.