KUALA LUMPUR (June 14): Hong Leong IB Research has initiated coverage on Berjaya Food Bhd with a “Hold” rating and target price of RM1.86 and said there was resilient same store sales growth (SSSG) for Starbucks.

In a note today, the research house said despite a weak consumer sentiment, Starbucks recorded a strong SSSG year-on-year of 5% in FY2016.

It said a gradual recovery in consumer spending in 2H16 should see a pick-up in SSSG growth, adding that Starbucks is expected to account for 78% of FY17 revenue.

“Continued drag from Kenny Rogers Roasters (KRR) and Jollibean. Despite strong show by Starbucks, KKR and Jollibean continued to drag on overall profitability. SSSG for KRR Malaysia and Indonesia operations were -18% and -17% yoy respectively for FY16.

“Closing unprofitable KRR and Jollibean outlets. Management is determined to close unprofitable outlets as KRR Indonesia and Jollibean remain loss-making putting a dampener on earnings. Rerating catalyst will emerge if measures to reduce drag from KKR and Jollibean come into fruition.

“Initiate with a Hold with a target price of RM1.86 based on a P/E multiple of 25x tagged to FY17 EPS,” it said.