SINGAPORE (June 25): CGS-CIMB continues to rate Koufu an “add” with an unchanged target price of 86 cents.
In a Wednesday report, analyst Ngoh Yi Sin says, “We recently hosted Koufu on a conference call with a group of institutional clients. We remain positive on the stock as it is likely to benefit from pent-up F&B demand after phase 2 reopening, and possible consumer down trading during the economic downturn.”
Singapore transitioned into Phase 2 reopening from June 19 and since then, same-store-sales growth (SSSG) at Koufu’s food courts and coffee shops has recovered to -20%, as compared to the 30- 40% y-o-y decline during the months of circuit breaker, while its restaurants reported slower traction.
“We also found varying levels of footfall during our channel checks over the weekend. Should such trends sustain, management believes revenue could return to 80-85% of pre-Covid-19 levels in July 20, posing potential upside to our FY20 earnings,” says Ngoh.
Meanwhile, the company’s two outlets in Macau continue to experience low footfall due to the absence of tourists.
Koufu has delivered steady growth in its outlet and mall management (OMM) business, opening at least two to three new outlets every year. On average, 10 to 12 new sites are put up for bidding yearly by the Housing and Development Board (HDB), and up to 20 in a good year.
With the company’s established track record and competitive pricing, Koufu’s win rate has been higher than its peers. Its OMM PBT margin has also improved from FY15’s 6.1% to 16.3% in FY19, as the group closes less profitable food courts and reaps higher operating leverage.
Apart from securing more locations in housing estates, hospitals and schools, Koufu also targets to add 10 to 20 F&B stalls per annum in Singapore and export its brands overseas via partnerships (Indonesia, Malaysia, Thailand) and the franchise model (Philippines).
While Koufu’s F&B business is fairly resilient with some 70% of FY19 revenue from the heartlands, it has also benefitted from increased online deliveries, which formed about 5% of FY19 sales. Apart from improving its online platform, it is also exploring the concept of ‘cloud kitchen’ in its upcoming integrated facility, which is on track to open in 2H20.
Management expects the new integrated facility to boost revenue growth and drive cost efficiencies in the medium term.
As at 2.30pm, shares in Koufu are trading at 70 cents or 3.6 times FY20 book with a dividend yield of 2.1%.
