Challenges to persist for Berjaya Food
Compounding this is the increasingly crowded coffee chain landscape, which may hinder its efforts to regain market share, according to Maybank Investment Bank Research (Maybank IB Research).
Berjaya Food operates the franchises for Starbucks, Kenny Rogers Roasters and Jollibean Foods cafés and restaurants in Malaysia.
For its third quarter ended March 31, 2025 (3Q25), the group's net loss widened to RM37.19mil from RM29.76mil in the same period a year ago.
This was mainly due to the weaker performance from its Kenny Rogers Roasters operations.
Following the weak set of results, Maybank IB Research said it was projecting the net loss for FY25-FY26 increasing to between RM24mil and RM130mil.
As for FY27, its earnings estimates have been lowered by 17%.
'Maintain 'sell' with a lower target price of 20 sen based on 2026 price-to-book value of 1.3 times,' the research house said in a report.
It added that the group's sales volume remains on a declining trend year-on-year due to a reduced network of Starbucks cafes following the closures of more than 10 stores year-to-date.
It also saw softer sales during the Ramadan period, with sales being impacted due to geopolitical tensions.
At the same time, the group continued to run heavy product promotions in attempt to drive sales.
To reflect a slower-than-expected sales recovery, CIMB Research also lowered its core net loss estimates for FY25 to FY27.
'Accordingly, our target price is lowered to 28 sen from 32 sen and we now peg the stock to a 2.2 times 2026 price-to-book value,' CIMB Research said in a report.
The adjustment was to account for Starbucks' weaker brand equity in Malaysia and rising competition in Malaysia's food and beverage segment.
The research house said the stock's current valuations have yet to account for the expectations of continued, albeit narrowing, losses through FY25 to FY27. Trading ideas: Perak Transit, Eco-Shop, Sapura Energy, Yoong Onn, Muhibaah, HeiTech Padu, Dnex, Pentamaster, CJ Century, 3REN, ES, ManagePay, Wesrports, Sentral REIT
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