SINGAPORE (Aug 20): Koufu Group is one of the few stocks bucking the lacklustre performance trend among F&B plays in the April to June quarter.
While most of peers saw a drop in earnings, the foodcourt operator stood out with a 16.2% jump in 2Q19 earnings to $7.2 million from $6.2 million in 2Q18, mainly due to higher contributions across its business segments.
See: Koufu reports 16.2% increase in 2Q19 earnings to $7.2 mil on higher revenue
Revenue increased 7.3% to $58.1 million from a year ago, with the group’s F&B as well as outlet and mall management segments seeing higher revenue contributions.
In 2Q19, the group opened four new Supertea and R&B outlets and further secured one new coffeeshop and three more foodcourt leases.
Koufu’s board has also proposed an interim dividend of 1 cent per share.
In its outlook statement, Koufu says it expects to remain competitive as it continues its productivity efforts and expansion plans despite key industry challenges including rising rental and labour costs.
Koufu has also entered into a joint venture to expand the Supertea and R&B Tea brands into Indonesia, following strong demand of the two brands in Singapore.
In an Aug 8 report by UOB Kay Hian, analyst Joohijit Kaur says, “With full-year contribution from Rasapura, new outlets ramping up and steady rollout of R&B Tea outlets, we think net profit could grow at double-digit levels from 2019 onwards.”
And at the rate Koufu is going with its tea beverage kiosk openings, Kaur believes that the group is on track to meet the research house’s expectations of 25 outlets by year end.
“Koufu is considered to be the most profitable listed F&B company and is trading at a deep discount of 13.5x 2019F PE, vs peers average of 22.7x,” adds Kaur, who has a “buy” call on Koufu with a target price of 95 cents.
DBS Group Research also has a “buy” recommendation on Koufu, albeit with a more conservative target price of 88 cents.
In an Aug 8 report, analyst Alfie Yeo says, “We continue to like the stock for its sound fundamentals including stable earnings, strong balance sheet, cashflows, ROAE, and decent dividend yield of 3.5-3.6%.”
However, he expects Koufu’s kiosk business to have a longer breakeven period and lower growth potential for its overseas businesses and local food courts, compared to the Street.
As at 2.45pm, shares in Koufu are trading 0.5 cent higher at 71.5 cents or nearly 4 times FY19 book with a dividend yield of 3.7%, based on UOB estimates.
