KUALA LUMPUR: Berjaya Food Bhd’s strong earnings delivery in the coming quarters appears to be sustainable following its strong performance that was seen in its recent third quarter ended June 30.

       The counter is also trading at an undemanding 13 times forward financial year 2023’s (FY23) price-to-earnings ratio (PER) that is below its five-year mean.

       According to RHB Research, this valuation is deemed attractive, while its fundamentals are also improving with consistently strong earnings delivery.

       “Growth in the medium term should be driven by its expansion plans of 30 to 35 Starbucks outlets a year.

       “We believe that the brand’s already entrenched network suggests that the expansion will be made into smaller towns and cities – which could contribute to sustainable sales improvements, moving forward,” RHB Research said in a report.

       It noted that the company’s focus on drive-through store formats have also helped it face the strong currents of the pandemic.

       RHB Research had raised its forecast FY22-FY24 earnings by 16%-11% with a newly raised target price of RM4.80, which is an 18 times forecast FY23 PER at a +1 standard deviation from its five-year mean.

       Commenting on its recent results, Hong Leong Investment Bank Research (HLIB Research) said the company’s third quarter had surpassed its and the consensus expectations, accounting for 114% and 99% of their original forecasts, respectively.

       “The outperformance was due to better-than-expected sales that were recorded and lower operating expenditures from effective cost-management strategies,” HLIB Research said.

       “We understand that the strong sales momentum that surpassed the pre-pandemic levels was driven by higher transaction counts.

       “The group has taken efforts in ramping up its marketing and promotions for seasonal drinks and merchandises which commands higher margins,” it added.

       It also noted that the increase in its in-store merchandises such as cups, tumblers, tote bags and water bottles had also also helped to attract foot traffic.

       To improve customer retention and services, Starbucks had introduced a new division called retail hospitality, which is responsible to be the point of contact for a prospective customer to get more information on any Starbucks product.

       Kenny Rogers Roasters’ (KRR) had also seen a continual improvement with a commendable same-store sales growth of 30% year-on-year, it said.

       “We opine this was partially contributed by the wider selection and variety in KRR stores. Apart from the signature chicken dishes, KRR now serves fish fillet and meatballs options for consumers to choose from,” HLIB Research said.

       The research house had maintained its “buy” call on the counter, with a higher target price of RM4.83 from RM3.80 previously, based on a 16 times PER of 2022’s forecast earnings, which is roughly in line with its peers.