"BFood's revenue projections, target price cut on forex pressure, boycott woes"

KUALA LUMPUR: Berjaya Food Bhd's (BFood) revenue projections' and target price has been cut on expectations of foreign exchange (forex) pressure dampening margins and a boycott of main revenue earner, Starbucks, impacting revenue.

BFood reported lower than expected profits for the first quarter of financial year 2024, on higher-than-expected costs due to inflationary pressures and unfavourable forex.

Starbucks made up 91 per cent of the group's revenue for the quarter, followed by KRR (six per cent) and Jollibean Singapore (two per cent).

Hogn Leong Investment Bank (HLIB) Research has a "hold" call on the stock with a lower target price of RM0.64, as it cut revenue and cost assumptions, for financial year 2024 and 2025 forecasts by eight per cent and nine per cent.

"Despite the cost optimisation efforts by the group, we opine the situation will remain challenging with the unfavourable forex as 55 per cent of the beverage costs is dominated in US dollar. Management also expects revenue growth to be hampered by the challenging perception brought about by the recent Israel-Gaza conflict," HLIB Research said.

BFood registered a profit after tax and minority interest (Patami) for the first quarter of FY2024 of RM19 million (+10 per cent quarter-on-quarter; -45 per cent year-on-year), falling short of its own estimates by 20 per cent and concensus full-year forecasts, by 18 per cent.

Patami was impacted by earnings before interest tax depreciation and amortisation margin compression by 6.4 per centage poin with inflationary cost pressures and unfavourable forex; and higher effective tax rate of 31.9 per cent.

Revenue eased by two per cent on the back of lower sales recorded by Kenny Rogers Roasters (KRR).

BFood registered 12 new Starbucks outlets with one special store, Starbucks Island Glade in Penang, that uses the latest Starbucks Oviso coffee machine, in the first quarter of FY2024.

BFood plans to open 40-45 new stores across Malaysia.

Paris Baguette launched one new store in Genting Skyworlds and so far, the performance is up to expectations.

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