PhillipCapital is keeping its “accumulate” rating on food court operator Koufu with an unchanged target price of 68 cents.
This comes on the back of the ahead-of-schedule sale of two of the group’s existing kitchens.
Koufu has granted an independent third party purchaser an option to purchase its two existing central kitchens located at 18 and 20 Woodlands Terrace for an aggregate consideration of $11.8 million, which works out to $312 per sq ft for their two central kitchens.
The purchaser has exercised the option on March 11, and the consideration will be paid fully in cash.
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The sale of the two existing central kitchens came ahead of the group’s intention to sell the properties within two years of obtaining its temporary occupation permit (TOP), where the proposed integrated facility (IF) is being constructed.
The TOP is expected to be obtained in 1Q2021, and operations are expected to commence by 2Q2021. The group will be occupying 75% of the total gross floor area while the balance of 25% has been full tenanted out.
Since the group will realise gains of over $10.0 million from the disposal, analyst Terence Chua believes that this profit could be passed on down to shareholders.
“We believe the group will distribute gains from the disposal amounting to 1.8 cents per share as special dividends to shareholders but they may opt to retain some of the proceeds in the near-term for working capital requirements given the current climate. As such, we believe Koufu may distribute the gains from the disposal over a two-year period rather than as a one-off special dividend,” says Chua.
On the outlook, Chua is positive on the group, especially post circuit breaker.
SEE:Koufu to dispose properties at Woodlands Terrace for $11.8 mil
“We believe the recovery in consumption post circuit breaker will continue to improve footfalls and revenue of the food courts and coffee shops in FY2021. We expect the completion of the group’s new IF in 1QFY2021 to yield cost savings and provide an additional revenue source from the rental of the balance 25% space,” adds Chua.
As at 11.40am, shares in Koufu are trading at 68 cents, meeting the analyst’s target price. The stock is trading at a FY2021 price-to-book ratio of 3.1 times, with a dividend yield of 2.8%.
