CGS-CIMB Research is keeping its “add” recommendation on Koufu with a higher target price of 94 cents, compared to 86 cents previously.
In a Dec 14 report, analyst Cezzane See says, “While we are positive on Koufu’s longer-term prospects, we think that we were previously too aggressive about FY2020 net margins and the pace of recovery in FY2021-2022. Hence we lower our PBT margins and cut our FY2020/2021/2022 forecasts by 32.1%/18.4%/4.1%.”
This report marks See taking over the coverage on this stock from analysts Ngoh Yi Sin and Caleb Pang previously.
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In its 3QFY2020 business update, Koufu revealed that revenue showed significant q-o-q improvement, although it has not reached pre-Covid-19 levels. It guided that its 3QFY2020 same-store-sales growth (SSSG) was 20% lower y-o-y over July 1 to Oct 31, compared to. the same period in 2019. This was slightly ahead of Singapore’s F&B services index, which fell some 27% y-o-y in 3QFY2020.
Koufu said that the footfall and revenue at its Singapore food courts and coffee shops (especially those located in the heartlands) as well as the R&B tea kiosks and four of its full-service restaurants saw significant improvements in 3QFY2020. However, footfall at food courts located near offices, downtown areas, tertiary institutions as well as tourist hotspots remains low.
In Macau (6% of 1HFY2020 revenue), business operations are still subdued given the reduced number of visitors and travellers.
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Despite the headwinds, Koufu opened one R&B Tea kiosk and one new foodcourt in Oct-Nov this year; and plans to open one quick-service restaurant and two more R&B Tea kiosks in 4QFY2020.
It also remains optimistic of its Dough Culture franchise, which acquisition was completed in July. For its integrated facility (IF), the temporary occupation permit (TOP) is now expected to be received in 1QFY2021 and the facility to commence operations by 2QFY2021.
“Despite the weaker FY2020, we like Koufu as we deem it a resilient F&B play for its exposure to Singapore’s heartlands. Moreover, its strong balance sheet ($72 million net cash at end June 2020) accords it dry powder to weather volatile times and/or to cash in on any potential mergers and acquisitions (M&A)," says See.
As at 12.10pm, shares in Koufu are trading at 67 cents or 3.3 times FY2020 book with a dividend yield of 1.6%.
