KUALA LUMPUR: Berjaya Food Bhd is keeping mum on its expansion plans and the impact of an ongoing boycott of Starbucks Coffee is having on its operations and plans.
Since the start of the Israel-Hamas conflict in October, BFood's share price has fallen 17 per cent. Year-to-date it is down more than 40 per cent.
Yesterday, the stock closed at 60 sen a share.
In a response to queries on the matter, a BFood spokesperson said the company would like to maintain confidentiality on the matter and focus on ongoing operations.
On Wednesday, RHB Research issued a research note advising investors to sell their shares in its franchise owner, Berjaya Food due to worse-than-expected impact from the ongoing boycott and much needed to regain lost market share post-boycott recovery.
The firm cut its target price for the stock by 24 per cent to 46 sen from 73 sen previously.
The recommendation came after RHB Research said its ground checks of Starbucks outlets showed at least a 30 per cent fall in foot traffic. This was despite shopping centres being crowded, and most of Starbucks' competitors having regular footfalls.
In response to Business Times' queries on whether the ongoing boycott had affected its Starbucks sales as well as expansion plan for the coffee chain, Berjaya Food replied briefly: "We wish to maintain confidentiality regarding the matter at this time, focusing on our ongoing operations."
RHB research in commenting on concensus estimates of an optimistic RM88 million earnings forecast for BFood said that they may have underestimated the impact and intensity of the ongoing boycott – the consensus may have expected a short-lived boycott and, as such, a limited sell-off.
The ongoing boycott is not the only challenge hampering the company's earnings.
Hong Leong Investment Bank (HLIB) analyst Syifaa' Mahsuri Ismail said Berjaya Food has other concerns too. This includes foreign exchange (forex) as 55 per cent of the beverage costs purchased from the principal Starbucks International is dominated in US dollars.
"They are still struggling with the forex. Sales have been on a downtrend. We believe that earnings will be affected by the forex in the next few quarters," she told Business Times.
Maybank Investment Bank Bhd, on the other hand, said Berjaya Food's 1QFY24 results were below its expectations, due to higher-than-expected operating expenses and weaker product mix.
"We expect similar high raw material cost trends in the near-term which caps group margin expansion potential in the sequential quarters. Topline growth could also be impacted by recent geopolitical tension.
"Hence, our FY24-FY26 earnings estimates are reduced by 5.0 per cent -11 per cent," it added.
BFood had flagged the impact of the Israel-Hamas conflict in its 1QFY24 results announcement.
On November 15, 2023 BFood said that Berjaya Starbucks is expected to return to its revenue growth momentum once the challenging market conditions brought about by the conflict in the Middle East are back to normal.
US coffee giant Starbucks opened its first store in Malaysia in partnership with Berjaya Food in Kuala Lumpur in December 1998.