KUALA LUMPUR (Nov 15): Shares of Berjaya Food Bhd (KL:BJFOOD) extended decline to their lowest in six weeks on Thursday, after the café-and-restaurant operator reported its fourth consecutive quarter of losses.
Berjaya Food fell as much as 6% to 38.5 sen, its lowest since Oct 1. The stock was trading at 39 sen at 9.30am, giving the company a market capitalisation of RM759 million. Trading volume totalled 960,400 shares so far.
The latest quarterly loss was unexpected, and analysts said investors should avoid the stock amid a bleak outlook due to persistent challenges to its key Starbucks business from the prolonged boycott.
“Despite strong brand equity and active promotions, we opine the boycott headwinds will stay, at least for the near term, which will greatly drag earnings,” Hong Leong Investment Bank said and kept its “sell” call on the stock.
Shares of Berjaya Food, which relies on Starbucks for most of its revenue, have plunged nearly 37% so far this year, amid widespread boycotts of brands supporting or perceived to be linked to Israel, amid the ongoing conflict in Gaza.
Analysts meanwhile are bearish on the stock with four ‘sell’ calls out of five research houses covering the stock. The consensus 12-month target price is 28 sen, according to Bloomberg, implying a potential decline of 26% from current price.
Berjaya Food has been diverting its attention to growing its other brands that also include Paris Baguette and Krispy Kreme Doughnuts. However, “meaningful earnings diversification will be slow”, given its dependence on Starbucks, Maybank Investment Bank said.
Heightened competition within the industry also hinders the company’s earnings recovery, the research house flagged.
Any strategic changes to Starbucks operations in Malaysia and Brunei following the appointment of Brian Niccol as chief executive of Starbucks Corp will likely take effect earliest by next year, CIMB Securities said. “Any meaningful results [will] take a longer time to materialise,” the house noted.
On Thursday (Noc 14), Berjaya Food announced a net loss of RM33.68 million for its first quarter ended Sept 30, 2024 (1QFY2025), versus a net profit of RM19.03 million a year earlier, which it blamed on “prolonged impact from the ongoing sentiment in relation to the Middle East conflict”.
Revenue for the quarter more than halved year-on-year to RM124.19 million. The company, however, said it is “cautiously optimistic that operational performance will gradually improve over the coming quarters”.