November 10, 2015
Berjaya Food (BFD MK)
Share Price: MYR2.56 MCap (USD): 220M Malaysia (Unchanged)
Target Price: MYR3.10 (+21%) ADTV (USD): 0.2M Consumer Disc. BUY Initiation
Key Data |
More bang for (Star)bucks 52w high/low (MYR) 3.30/1.98 Largest listed F&B outlet operator in Malaysia by market cap . 3m avg turnover (USDm) 0.2 with forecast three-year net profit CAGR of 30%. Free float (%) 35.6 . Growth underpinned by BStarbucks, which targets 100 new Issued shares (m) 375
outlets over next four years (+11% pa). Market capitalization MYR960.2M RESEARCH . Initiative coverage with a BUY and MYR3.10 TP; total return Major shareholders: is 23% with CY16 net yield of 1.6%. -Berjaya Corp. Bhd. 52.2% -UBS A/G London 5.4% Tip of the iceberg for BStarbucks -Albizia ASEAN 4.9% Berjaya Starbucks (BStarbucks), owner of the largest coffee chain
COMPANY in Malaysia, is poised to lift Berjaya Food’s forward revenues to Share Price Performance 3.40 300 new highs as it plans to open 100 more Starbucks in Malaysia or 25 3.20 280 outlets pa from FY16-FY19 (end-FY15: 193 outlets). This will lift its 3.00 260 2.80 240 revenue contribution to Berjaya Food to 70-73% in FY16-18E from 2.60 220 2.40 200 57% in FY15. The coffee company also plans to widen its beverage 2.20 180 business and tap new markets by entering the FMCG segment by 2.00 160 1.80 140 end-FY16. In the meantime, BStarbucks continues to leverage on 1.60 120 1.40 100 its prominent branding and market leader position (43% market 1.20 80 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 share) to drive topline growth. Berjaya Food - (LHS, MYR) Berjaya Food / Kuala Lumpur Composite Index - (RHS, %) Elsewhere, Berjaya Food is expanding its regional foothold via
Kenny Rogers Roasters and Jollibean outlets, and we do not rule 1 Mth 3 Mth 12 Mth out future M&A involving parent co. Berjaya Corp’s F&B brands. Absolute(%) 12.8 12.8 (16.9) Attractive valuations backed by strong growth Relative to index (%) 14.1 10.7 (9.9)
We forecast Berjaya Food to achieve a three-year core net profit Maybank vs Market CAGR of 29.5% (FY15-FY18), largely driven by BStarbucks, which Positive Neutral Negative contributes 86% of FY16E EBIT. We like Berjaya Food as a growth Market Recs 5 0 0 stock, backed by its major expansion plans and new markets Maybank Consensus % +/- potential (i.e. FMCG and concept stores). Current valuation of Target Price (MYR) 3.10 3.10 0.0 23.4x CY16 FD PER is decent versus the domestic consumer sector '16 PATMI (MYRm) 33 39 (14.8) average of 18.6x and Starbucks Corp’s (US) 32x given its anticipated rapid earnings growth relative to the consumer sector’s '17 PATMI (MYRm) 46 49 (7.0) Source: FactSet; Maybank tepid two-year growth of 4%. Current valuation implies a CY16 PEG of just 0.79x. Initiate at BUY with a MYR3.10 TP pegged to 22.5x CY17 FD PER (implies CY16 PEG of 0.96x).
FYE Apr (MYR m) FY14A FY15A FY16E FY17E FY18E Revenue 150.4 376.8 531.5 607.5 693.2 EBITDA 14.6 213.7 75.3 93.6 108.3 Core net profit 22.7 25.7 33.3 45.8 55.8 Core FDEPS (sen) 7.0 6.8 8.8 12.0 14.7 Core FDEPS growth(%) 18.8 (2.4) 29.1 37.3 21.9 Net DPS (sen) 3.2 4.3 3.3 4.6 5.6 Core FD P/E (x) 36.8 37.7 29.2 21.3 17.5 P/BV (x) 4.2 2.4 2.3 2.2 2.1 Net dividend yield (%) 1.3 1.7 1.3 1.8 2.2 ROAE (%) 14.9 9.2 8.3 10.8 12.5 Kevin Wong ROAA (%) 12.6 5.7 4.7 6.3 7.6 (603) 2082 6824 EV/EBITDA (x) 26.2 5.1 14.7 11.7 10.0 [email protected] Net debt/equity (%) net cash 39.1 37.8 33.6 27.9
SEE PAGE 31 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)
Berjaya Food
Investment thesis
Initiate with BUY and a MYR3.10 TP
Berjaya Food (BFood) was listed in March 2011 and its business then was primarily the development and operation of the Kenny Rogers Roasters (KRR) chain of restaurants in Malaysia. Subsequently, BFood acquired and became the franchise holder of: 1) Starbucks in Malaysia and Brunei, 2) Jollibean in Singapore and Malaysia; and 3) KRR in Indonesia and Cambodia. BFood had 362 outlets in total in the region as at end-FY15. Starbucks, the prime earnings driver
We estimate BFood to achieve a favourable three-year forward net profit CAGR of 29.5% (FY15-18), largely underpinned by BStarbucks following the full acquisition of BStarbucks in Sep 2014. We expect BFood to open 25 Starbucks outlets in Malaysia in FY16 and subsequently 25 more each year over the next three years. This would take the number of Starbucks outlets to 268 by FY18 from 193 as at end-Apr 2015, representing a three-year (FY15-18) CAGR of 11%. Leader in chain coffee outlets in Malaysia
Starbucks has remained the leader in Malaysia based on its 195 outlets (end-Jul 2015) or 43% out of the 455 chain coffee outlets in total – ahead of McCafe (20%), The Coffee Bean & Tea Leaves (16%) and Gloria Jean’s Coffee (10%). This enables the creation of strong consumer demand and customer loyalty. Starbucks in Malaysia also has the highest tender rate globally of 47% for its loyalty/pre-paid card. Tapping new segments via FMCG
BStarbucks plans to enter the FMCG segment and launch its Ready-To-Drink (RTD) products by April-May 2016. We understand gross margins could be about 40-50% and an additional 5-10% once BStarbucks can produce its own RTD products via third-party producer(s). Healthy cash flows
We estimate a steady stream of free cash flow per share of 6-15sen for FY16-18, backed by non-excessive capex for outlet openings and strong operating cash flows. This enables BFood to commit to its dividend policy of up to 50% of its earnings; translating to FY16-18 net yields of 1.3-2.2% (at assumed 50% payout; FY14-15 payouts were 51%/84%). We view BFood as a growth stock as opposed to a dividend-centric stock. Attractive valuation
Initiate with a BUY rating and a MYR3.10 TP pegged to 22.5x CY17 PER (at – 0.5SD of one-year forward PER mean), offering 23% total return. We like BFood for its strong earnings growth catalysts from BStarbucks and decent valuations. BFood is trading at 23.4x CY16 FD PER, which is above the average CY16 PER of 18.6x for the Malaysian consumer sector. However, BFood offers rapid earnings growth potential as compared to the sector’s minimal 4% earnings growth.
November 10, 2015 2
Berjaya Food
Investment thesis in charts
Revenue trend EBIT trend Significant jump in FY15 revenue post-full acquisition of Similarly, FY15 core operating profit surged YoY post-full BStarbucks acquisition of BStarbucks
(MYRm) Revenue (LHS) YoY (RHS) (%) (MYRm) EBIT (LHS) YoY (RHS) (%) 800 200 90 400 80 350 700 Acquired Acquired 300 600 remaining 50% 150 70 remaining 50% stake in 60 stake in 250 500 BStarbucks BStarbucks 200 50 400 100 150 40 300 100 30 50 200 50 20 0 100 10 -50 0 0 0 -100 FY12A FY13A FY14A FY15A FY16F FY17F FY18F FY12A FY13A FY14A FY15A FY16F FY17F FY18F
Source: Company, Maybank KE Source: Company, Maybank KE
Outlet counts Starbucks outlet penetration (outlet per 1m population) With 25 new outlets p.a. moving forward, BStarbucks will Demographic-based growth driver for BStarbucks, which remain the top earnings driver indicates sizeable room for outlet openings in Malaysia
Starbucks - Malaysia Starbucks - Brunei 45 40.7 KRR - Malaysia KRR - Indonesia 40 37.4 KRR - Cambodia Jollibean - Malaysia 35 (Outlets) 300 30 25 19.3 20 193 15 12.2 200 170 8.3 135 142 10 6.4 120 3.1 115 5 0.8 1.0 78 90 100 59 61 64 69 0
42 53 50 47 47 46 US 24 27 UK 9 16
1 2 3 12 China Japan
0 Canada
Malaysia
Thailand Indonesia FY10A FY11A FY12A FY13A FY14A FY15A Singapore
Source: Company, Maybank KE Source: Company, CEIC, Maybank KE
Quarterly revenue and pre-tax profit margin BFood: One-year forward PER New levels in quarterly revenue post-inclusion of entire Trading at undemanding at one-year forward PER mean BStarbucks revenue in BFood’s topline PE (x) Revenue (LHS) Pretax profit margin (RHS) (RMm) (%) 50 160 25 45 Acquired remaining 50% 140 40 stake in BStarbucks 20 120 35 +1SD, 36.2 30 100 15 Mean, 27.0 80 25 20 60 10 -1SD, 17.8 15 40 5 10 20 5
0 0 0
Jun-15 Jun-12 Jun-13 Jun-14
Sep-12 Sep-13 Sep-14 Sep-15
Mar-13 Mar-14 Mar-15
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16
Dec-12 Dec-13 Dec-14
Source: Company, Maybank KE Source: Bloomberg, Maybank KE
November 10, 2015 3
Berjaya Food Contents
Page 1. Company Background 5 2. Products and Services 12 3. Key Investment Thesis 14 3.1 Starbucks, the prime earnings driver 14 3.2 Leverages on leading market share and prominent branding 16 3.3 Demographics show growth opportunities 16 3.4 Tapping new market segments and consumers via FMCG 18 3.5 Drive-through outlets enhance profitability 18 3.6 M&A channel for BCorp’s F&B? 19 4. Earnings & Financials Outlook 20 5. Valuations 23 6. Risks 25
November 10, 2015 4
Berjaya Food
Company Background
BFood was incorporated on 21 Oct 2009 and was listed on the main market of Bursa Malaysia Securities Bhd on 8 Mar 2011. It sold 35.8m shares at MYR0.51/share.
At the time of its listing, BFood had only one subsidiary, ie, 100%-owned Berjaya Roasters (M) Sdn Bhd (BRoasters), which is mainly engaged in the development and operation of the KRR chain of restaurants in Malaysia.
In Jul 2012, BFood acquired 50% of BStarbucks for MYR71.7m. This was funded via a ‘4 rights and 4 warrants’ issue for every 5 BFood shares held. In Jul 2014, it proposed the acquisition of the remaining 50% shareholding from Starbucks Coffee International Inc, for MYR279.5m. The acquisition was completed on 18 Sep 2014.
Three key brands in BFood
From left to right: Kenny Rogers Roasters, Starbucks and Jollibean Source: Company
As for its regional operations, the group:
In Jul 2011, entered into a 51%-owned JV with PT Mitra Samaya, PT Harapan Swasti Sentosa and PT Boga Lestari Sentosa, to operate the KRR franchise in Java Island and Bali, Indonesia, under PT Boga. The acquisition price was MYR1.91m coupled with subscription to a rights at MYR1.99m. BFood also provided a loan of MYR6.09m for a period of seven years for the development of the KRR brand and opening of future restaurants. BFood has an option to increase its stake to 70% at an average option price of IDR943,000 per PT Boga share, exercisable within seven years.
Acquired a 100% stake in Singapore-based Jollibean Foods Pte Ltd, in Dec 2012, for MYR19.02m. Guaranteed profit in FY13 was MYR1.27m.
Entered into an 80%-owned joint venture in Berjaya Food Supreme, in Oct 2013, for MYR6.2m to undertake the operations of “Starbucks Coffee” chain in Brunei.
Incorporated 80%-owned Berjaya Roasters (Cambodia) to operate the KRR chain of restaurants in Cambodia, in July 2014.
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Berjaya Food
BFood: Timeline of major events and acquisitions
Incorporation of Berjaya Food - 21 Oct 2009
Listed on Bursa Malaysia's main board - 8 Mar 2011
Acquired 50% of Berjaya Starbucks - 9 July 2012
Acquired 100% of Jollibean Foods - 7 Dec 2012
Acquired remaining 50% of Berjaya Starbucks - 18 Sep 2014
Source: Company
BFood: Corporate structure
Berjaya Food Bhd
Berjaya Food Berjaya Roasters (M) Sdn Berjaya Food Trading Berjaya Starbucks Coffee (International) Sdn Bhd - Bhd - 100% Sdn Bhd - 100% Company Sdn Bhd - 100% 100%
Jollibean Foods Pte Ltd - PT Boga Lestari Berjaya Roasters Berjaya Food Supreme 100% Sentosa - 51% (Cambodia) Ltd - 70% Sdn Bhd - 80%
Berjaya Jollibean (M) Sdn Bhd - 100%
Source: Company
BFood: SWOT analysis Strengths Weaknesses Leader in chain coffee outlet Intense competition within the Global prominent branding of crowded F&B market Starbucks Small regional presence outside High capacity for sizeable outlet Malaysia expansion Opportunities Threats Low outlet penetration in Malaysia Downturn in consumer sentiment Fewer coffee chain outlets outside Depreciation of MYR against USD major cities Rising operating costs Untapped market segments i.e. FMCG Source: Maybank KE
November 10, 2015 6
Berjaya Food
. The management team
Dato’ Robin Tan Yeong Ching, 41, is the Executive Chairman of BFood. He graduated with a Bachelor of Social Science Degree in Accounting/Law from the University of Southampton, UK, in 1995. He is currently the CEO of Berjaya Corporation and Berjaya Sports Toto Bhd, with directorships in various other Berjaya Group companies. His father, Tan Sri Dato’ Seri Vincent Tan Chee Yioun, is a major shareholder of the company.
Dato’ Francis Lee Kok Chuan, 56, was appointed CEO of BFood on 20 May 2010. He graduated with a Bachelor of Economics (Accounting Major) from Monash University Melbourne and is a Fellow Member of the Institute of Chartered Accountants in Australia. He joined Berjaya Land as a Senior Manager, Internal Audit in 1994 and was Executive Director of Berjaya Group from Jan 2000 to Sep 2001. He holds various other directorships within the Berjaya Group of companies.
. About Berjaya Roasters
BRoasters is principally engaged in the development and operation of the KRR chain of restaurants in Malaysia via a Master Development Agreement (MDA) that was entered into on 1 Jan 2004 between BRoasters and Roasters Asia Pacific (M) Sdn Bhd (“RAPM”), the KRR master franchisee for Malaysia. This MDA grants BRoasters the rights to develop KRR restaurants in Malaysia for an initial term of 25 years commencing 1 Jan 2004. The MDA may, at BRoasters’ option, be extended by an additional 25 years.
Berjaya Group holds the global KRR brand
KRR was originally established by country and Western singer Kenny Rogers, and former Governor of the state of Kentucky in US, John Y Brown Jr, in 1991. KRR opened its first restaurant in Coral Spring, Florida, in August 1991. Today, KRR has restaurants in various other countries such as the US, Singapore, China, Bahrain, Indonesia and the Philippines.
Berjaya Group, which is BFood’s parent company with a 52.2% stake (currently), acquired a 100% stake in KRR International Corp, USA, in Apr 2008. With this acquisition, Berjaya Group now effectively holds the worldwide KRR brand, including the KRR franchise.
November 10, 2015 7
Berjaya Food
KRR: corporate structure
Berjaya Group Bhd Berjaya Food 52.2% Bhd 100%
Berjaya Group (Cayman) Ltd 100% 100% Roasters Asia Master franchisee for Hong Kong Pacific (HK) Ltd Berjaya Roasters (M) 100% 100% Sdn Bhd Grants franchise rights Roasters Asia Pacific Roasters Asia Pacific Master franchisee for Asia Pacific (M) Sdn Bhd (Cayman) Ltd region (other than Hong Kong and 13 Malaysia) Master franchisee independent 100% franchisees in for Malaysia KRR International Corp Malaysia Holds the worldwide KRR brand Note: Corporate structure of entities relevant to KRR in Malaysia only; whilst Roaster Asia Pacific (M) Sdn Bhd (RAPM) is the master franchisee for the KRR brand in Malaysia, RAPM’s primary role is to act as custodian of the KRR standard of operations and procedures. Source: Company
BRoasters is now sole franchisee in Malaysia
The right to grant KRR franchises to third parties in Malaysia initially laid with RAPM, with first right of refusal to BRoasters. This changed upon the signing of a supplemental agreement in Feb 2008 as RAPM’s right to grant further franchises to third parties in Malaysia ceased. Consequently, BRoasters is now the sole franchisee of RAPM in respect of the development and operation of KRR restaurants in Malaysia. There are currently 13 independent franchisees-owned restaurants in Malaysia that were opened prior to the signing of the supplemental agreement.
89 restaurants nationwide
BRoasters’ first KRR restaurant opened in Nov 1994 and today, there are 89 restaurants nationwide.
The restaurants feature rotisserie roasted chicken as their main core product complemented by a variety of hot and cold side dishes. These include muffins, jacket potatoes, vegetable salads, pasta, soups, desserts and beverages. All the KRR restaurants serve their customers in a full service, mid-casual dining concept, with free Wi-Fi services.
BRoasters’ tagline is “Less Fat…, Less Salt…, Less Calories…” with the aim of serving wholesome, hearty and well-balanced meals. Its rotisserie style of cooking allows the meat to be cooked evenly in its own juices, allowing the fats to be drained away while maximizing the retention of juices and nutrients.
November 10, 2015 8
Berjaya Food
Three types of restaurants
BRoasters could potentially offer up to three types of restaurants:
Non-traditional Restaurant: less than 800 sq ft and may have little or no seats. Located in food courts, with the exception of kiosk-type structures located within the aisles of shopping malls.
Express Facility Restaurant: different from “Non-traditional Restaurants” in terms of the menu offerings and method of quick preparation. It is a business that caters to “take-away” services.
Traditional Restaurant: more than 800 sq ft, has proper seating and located in retail areas. Has a standard menu offering and the food is served in the conventional way.
Currently, all of the group-owned restaurants operate as “Traditional Restaurants” and typically range between 1,800 and 2,500 sq ft in size.
BRoasters has since introduced ROASTERS Catering & Delivery and it opened the first KRR drive-thru restaurant in Asia at Setia Tropika, Johor.
Main suppliers
BRoasters’ poultry requirements in Peninsular Malaysia are ordered through central purchase and they are pre-marinated at the suppliers’ premises before delivery to the KRR restaurants. For East Malaysia, where the volume of poultry is lower, the poultry is marinated at the respective KRR restaurants. For perishable food other than poultry, these are ordered directly by the KRR restaurants from the designated suppliers.
The main suppliers include Farm’s Best Food Industries Sdn Bhd and Dindings Poultry Processing Sdn Bhd for poultry products, English Hotbreads (SEL) Sdn Bhd for muffin and sauces, and Unilever (M) Holdings Sdn Bhd for dressing and sauces.
Competitors
KRR’s top competitors in the chicken outlet chain space include Nando’s, KFC, The Chicken Rice Shop and Rasamas (formerly Raya Ayamas).
KRR franchises in Indonesia and Cambodia
In Jul 2011, BFood entered into a conditional joint venture agreement with PT Mitra Samaya, PT Harapan Swasti Sentosa, and PT Boga Lestari Sentosa to develop and operate the KRR franchise in Java Island and Bali, Indonesia, under PT Broga.
November 10, 2015 9
Berjaya Food
. About Berjaya Starbucks
On 19 Jul 2012, BFood acquired 50% of BStarbucks from Berjaya Group for MYR71.7m. This was funded via a 4 rights with 4 warrants for every 5 BFood shares issue at MYR0.65 per rights share. The deal valued BStarbucks at an historical PER of 13.5x based on its FYE4/11 net profit of MRY10.6m.
On 23 Jul 2014, BFood entered into a conditional sale & purchase agreement with Starbucks Coffee International, Inc, (SCI) to purchase the remaining 50% stake in BStarbucks for USD88m or MYR279.5m, which on completion, will turn BStarbucks into a 100%-owned subsidiary of BFood. SCI is a wholly-owned subsidiary of Starbucks Corporation, which is listed on NASDAQ. The proposed acquisition price of MYR279.5m translates into an historical FY14 PER of 16x.
ADOA to be extended
BStarbucks’ right over Starbucks retail stores in Malaysia is captured within the Amended and Restated Area Development and Operation Agreement (ADOA) dated 16 Feb 2012, which was entered into between BStarbucks and SCI.
The current ADOA grants BStarbucks the exclusive right to develop, open and operate Starbucks retail stores in Malaysia up to 2024. Following the acquisition of the remaining 50% stake, the ADOA has been extended by another 15 years to expire in 2039. It will also lay out the expected opening of a minimum of 25 new stores each year commencing from 2015 up to 2019.
Has 195 stores nationwide
Starbucks in Malaysia opened its first store at KL Plaza (now known as Fahrenheit 88) on 17 Dec 1998. As at 31 Jul 2015, it has 195 stores nationwide.
BStarbucks introduced its first drive-thru concept store in Dec 2009 in Johor Bahru and as at 31 July 2015, it has 19 drive-thru concept stores in Selangor, Johor, Penang, Perak, Negeri Sembilan and Pahang.
Constant innovation
In 2011, BStarbucks launched its “Personalised Frappuccino”, which has been well received, as well as its “VIA Ready Brew”. The latter is a ready- to-go instant coffee and can be consumed anywhere, anytime, simply by dissolving it in either hot or cold water. In Mar 2012, it launched the “Blonde Roast” coffee. In Mar 2013, BStarbucks introduced more than 20 new food products consisting of cakes, desserts, sandwiches and pastries. It also launched “Asian Dolce Latte”, a new promotional beverage with an Asian twist.
In Oct 2015, BStarbucks opened its first Starbucks Reserve Store in The Gardens Mall, Kuala Lumpur. The Reserve Store is similar to the existing Starbucks Reserve outlet in the US whereby the outlet serves premium and signature roasted coffees, on top of its current menu items.
November 10, 2015 10
Berjaya Food
Starbucks franchise in Brunei
On 7 Oct 2013, Berjaya Food (International) Sdn Bhd (BFI), a wholly-owned subsidiary of BFood, entered into a joint venture-cum-shareholders’ agreement with Deluxe Daily Food Sdn Bhd for the subscription of 80% equity interest in Berjaya Food Supreme Sdn Bhd, for BND2.4m (MYR6.2m). Deluxe Daily Food holds the remaining 20% stake. Berjaya Food Supreme operates the “Starbucks Coffee” chain of cafes in Brunei.
On 16 Feb 2014, it opened its first store at the Mabohai Shopping Complex in Brunei. The store features a traditional coffee bar also known as “slow bar”, which allows customers to savour their coffee using the “pour over” brewing method. Currently there are three Starbucks outlets in Brunei, which includes a drive-through outlet.
. About Jollibean Foods
On 7 Dec 2012, BFood acquired a 100% stake in Jollibean Foods for MYR19.02m. This has given BFood the sole and exclusive worldwide rights to develop, operate and manage all the outlets under the brand names of “Jollibean”, “Sushi Deli”, “Kopi Alley”, “DanGo”, and “JFreeze by Jollibean”. Jollibean Foods was incorporated in Nov 1993. There are 32 “Jollibean” outlets, 12 “Sushi Deli” outlets and 1 “DanGo” outlet, all of which are based on the Quick Service Concept, and 2 “Kopi Alley” outlets in Singapore.
Its signature products are its fresh daily made “Jollibean” soy milk drinks using Grade A, non-genetically modified organism (non-GMO) identity preserved Canadian soy beans. It also introduced traditional snacks such as the street pancake – Mee Chiang Kueh – which complements its soy milk drinks.
Sushi Deli serves an array of “pick-and-choose” sushi, assorted sashimi sets, sushi sets, maki sets, Japanese salads, bento sets, party platters and Japanese sweets.
Berjaya Jollibean (M) Sdn Bhd has opened its first kiosk at Berjaya Times Square in Dec 2013 and its second kiosk at Sunway Pyramid in Feb 2014.
November 10, 2015 11
Berjaya Food
Products and Services
Predominantly restaurant operations
BFood’s business is mainly focused in the development and operation of its chain of KRR, Starbucks and Jollibean outlets (collectively refered to as JFPL’s group of brands). BFood’s current presence is largely in Malaysia, followed by Singapore and other countries such as Indonesia, Brunei and Cambodia. The country breakdown of BFood’s outlets is shown as below:
BFood: List of outlets (as at end-Jul 2015) Total outlets Kenny Rogers Roasters 118 Malaysia 89 Indonesia 28 Cambodia 1 Starbucks 198 Malaysia 195 Brunei 3 Jollibean 49 Singapore 47 Malaysia 2 TOTAL 365 Source: Company
While the majority of outlets are restaurants, BFood also operates via drive-through concept outlets and kiosks. Among BStarbucks’s 195 outlets in Malaysia, 19 outlets come with a drive-through convenience. KRR has also recently opened its first drive-through restaurant and it has started to offer catering and delivery services.
KRR, BStarbucks and JB outlets
Clockwise: KRR (Malaysia), Starbucks (Malaysia), Starbucks (inside; Malaysia) and Jollibean (Singapore); Source: Company, Maybank KE
November 10, 2015 12
Berjaya Food
Other products
Elsewhere, Starbucks has been actively promoting its Starbucks card (prepaid/stored value card) and merchandises such as tumblers, pre- packed coffee mix and mugs. The Starbucks card, which is on a prepaid basis, offers various benefits to cardholders such as free beverages and promotions while the constant release of seasonal-based designed cards appeal to many.
BStarbucks: Merchandises and Starbucks cards
Clockwise: Display of merchandises for sale, pre-packed coffee and seasonal Starbucks cards Source: Maybank KE
November 10, 2015 13
Berjaya Food
Key Investment Thesis FY16E: Revenue breakdown As discussed, BFood is the franchise holder of three major brands i.e. Others* Starbucks, KRR and Jollibean. Of the three, the most valuable and fastest 2% growing is undoubtedly Starbucks, for which we project a 3-year revenue JB (Sg) BSbux and EBIT CAGR (FY15-FY18) of 14% respectively, driven mainly by outlet 8% (My) and product expansion. KRR 70% (Ind) As we expect earnings growth from KRR and Jollibean to expand at a much 2% KRR slower single-digit pace, we project Starbucks’ contribution to group (My) revenue to expand from 57% in FY15 to 73% in FY18 while at the EBIT level, 18% we see its contribution rising to a much more meaningful 89% of group EBIT * Others: BStarbucks (Brunei), KRR (Cambodia), by FY18 from 70% in FY14. and JB (MY) Note: FY16E revenue: MYR558.2m Much of BFood’s investment thesis therefore focuses on Starbucks, which Source: Maybank KE we see as the main source of growth for the group.
FY16E: EBIT breakdown Starbucks, the prime earnings driver JB (Sg) We forecast BFood to achieve a favourable 3-year net profit CAGR of 29.5% 1% (FY15-FY18) with a new high of MYR55.8m in FY18, largely underpinned by BSbux BStarbucks’ (contributes 70%/89% of FY16E revenue/EBIT) strong earnings KRR (My) (My) growth prospects. We expect BFood to open 25 Starbucks outlets in 11% 86% Malaysia in FY16 and subsequently 25 more p.a. over the next three years. This would take the number of Starbucks outlets to 268 by FY18 from 193 BSbux (Brunei) as at end-Apr 2015, representing a 3-year (FY15-18) CAGR of 11%, in 2% tandem with the five-year outlet CAGR of 11% between FY10 and FY15. Note: FY16E EBIT: MYR63.3m; total operating losses of MYR3.8m from KRR (Indo) and KRR (Cambodia) Historical outlet count Source: Maybank KE Starbucks - Malaysia Starbucks - Brunei KRR - Malaysia KRR - Indonesia KRR - Cambodia Jollibean - Malaysia Jollibean - Singapore (Outlets) 250 193 200 170 142 150 135 115 120 90 100 78 64 69 59 53 61 42 50 47 47 46 27 50 16 24 9 1 2 3 1 2 0 FY10A FY11A FY12A FY13A FY14A FY15A KRR: Kenny Rogers Roasters; Source: Company
We are positive on BStarbucks’ prospects given its strong track record (five-year revenue/EBIT CAGR of 22%/49%), favourable margins (FY15E EBIT margin: 16%) and expansion potentials.
This is also backed by its strong SSSG of 11-16% from FY11-14 and average revenue/outlet 3-year CAGR (FY11-14) of 14%. We understand FY15’s SSSG of -5% was largely due to events such as: 1) slower tourism in Malaysia post the airline tragedies; 2) the boycott of US-based products; and 3) a one- month consumer sentiment impact from the introduction of GST from 1 Apr 2015 onwards. The negative SSSG in FY15 was also amplified by FY14, which had recorded strong revenue growth and SSSG of 29% and 16% YoY, respectively.
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Berjaya Food
Consumer sentiment continued to weaken into 1QFY16 as a result of the GST, whereby BStarbucks’ SSSG was -7% YoY during the quarter. However, the trend reversed and BStarbucks recorded positive SSSG of about 14-16% in the first two months of 2QFY16 (Aug-Sep 2015).
Historical same-store sales growth
BStarbucks (M'sia) KRR (M'sia) KRR (Indo) Jollibean
25 22 20 17 15 16 11 10 9 8 7 5 6 0 -3 -2 -2 -2 -5 FY11A FY12A FY13A FY14A-4 FY15A-5 -7 -10 -11 -11 -15
Source: Company
Average revenue/outlet
BStarbucks (M'sia) KRR (M'sia) KRR (Indo) Jollibean (MYR) 2.00 1.77 1.80 1.65 1.36 1.50 1.36 1.23 1.39 1.13 1.21 1.34 1.00 0.77 0.78 0.81 0.85
0.50 0.68 0.56 0.46
0.00 FY11A FY12A FY13A FY14A FY15A Source: Company, Maybank KE
Elsewhere, BFood continues to seek out new prospective markets/locations for BStarbucks and KRR whereby BFood plans to open eight and three new KRR restaurants in Malaysia and Indonesia respectively in FY16; as well as 10 Starbucks outlets in Brunei over the next five years. As for its new Cambodian market venture, BFood also plans to open five new KRR restaurants over the next five years (FY16-FY20), on top of its existing one store, which opened in Jul 2014.
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Berjaya Food
Leverages on leading market share and prominent branding
Based on our analysis of existing coffee chain outlets in Malaysia, Starbucks remains the leader based on number of outlets: 195 outlets (as at end-Jul 2015) or 43% out of a total of 455 outlets in the country. We believe this goes hand-in-hand with its globally-recognised brand, which is able to create strong consumer demand and creates customer loyalty.
Comparison of chain coffee outlets in Malaysia Gloria San Coffee Jean’s Francisco Starbucks McCafe Bean Coffee Coffee Dome Total Outlets 195 93 71 44 31 21 455
% of total 43 20 16 10 7 5 100
Note: Only companies with >10 coffee outlets are included; Coffee Bean: The Coffee Bean & Tea Leaves Source: Respective companies’ websites, company
We note that Starbucks in Malaysia has the highest tender rate of 47% for its loyalty/pre-paid card (Starbucks card), which suggests that about 47% of transacted sales were from existing cardholders and this signifies a high rate of returning customers. In comparison, the average US and global tender rates are estimated at just 15% and 12% respectively. BStarbucks has about 1.8m cards in circulation currently (vs a Malaysia population of 31m presently). Minimum prepaid value per new card is MYR50 and there is no fixed value for subsequent prepayments.
Meanwhile, BStarbucks has the advantage of having the first port of call (tenancy preference given to BStarbucks) to open its outlets in all the upcoming retail malls or premises in Malaysia, due to its prominent branding and demand.
Demographics show growth opportunities
As compared to other countries with a sizeable number of Starbucks outlets, there’s still plenty of room for BStarbucks to catch up in terms of outlet openings, based on a simple Starbucks outlets per 1m population ratio (“outlet penetration ratio”) as shown overleaf. The US, which is Starbucks Corporation’s (SBUX US) largest market with over 11,000 outlets and a population of 320m, has an outlet-penetration ratio of 37.4x or 37 outlets per 1m population vs Malaysia at just 6.4x. For neighbouring countries, Singapore is also ahead of Malaysia at 19.3x but Indonesia and Thailand are also under-penetrated markets with ratios of just 0.8x and 3.1x respectively. Hence, the average (excluding Malaysia) is 15.4x.
November 10, 2015 16
Berjaya Food
Starbucks outlet penetration ratio: selected countries
45 40.7 40 37.4 35 30 25 19.3 20 15 12.2 8.3 10 6.4 3.1 5 0.8 1.0
0
US
UK
China
Japan
Canada
Malaysia
Thailand Indonesia Singapore Note: Population used in ratio calculations are based on 2014’s census; top 5 countries based on store count: U.S., Canada, China, Japan, and U.K.; Neighbouring countries: Singapore, Thailand, and Indonesia; simple average excluding Malaysia is 15.4x. Source: Company, Starbucks Corporation, respective Starbucks’ websites; CEIC Data
Looking closer at the Malaysian market, we believe the demographics are Mid-year population 2010 census: conducive for BStarbucks’ business as its products and cafes would mostly Selected age groups appeal to the young and adult population in urban areas. Out of the total 15-19 20-24 Malaysian population of 28.6m in 2010 (latest available population census y.o. Other 10% y.o. with breakdown): 1) 71% were in urban areas; and 2) 56% was within the age 10% age group of 15-49. The IMF forecasts Malaysia’s population to grow at a groups 25-29 44% y.o. steady rate of 1.7% YoY pa to 33.9m people by 2020. Elsewhere, there are 10% still plenty of untapped markets that BFood could expand to; whether it’s 30-34 in the rural areas or in other countries, via Starbucks, KRR and Jollibean. 45-49 40-44 35-39 y.o. 7% Its latest overseas ventures were Brunei (Starbucks; FY14) and Cambodia y.o. y.o. y.o. 6% 6% 7% (KRR; FY15). Source: CEIC Data
Malaysia population and growth Mid-year population 2010 census: Urban (m people) Population (LHS) YoY (RHS) (%) and Rural 40 2.5 35 Rural 2.0 29% 30 25 1.5 20 15 1.0 10 0.5 Urban 5 71% 0 0.0
Source: CEIC Data
2012 2007 2008 2009 2010 2011 2013 2014 2015
2017F 2018F 2019F 2020F 2016F Source: CEIC Data
We believe BFood could leverage on its existing advantages for its future expansion, such as: 1) an established management team with relevant expertise; 2) strong branding, which creates brand awareness and loyalty; and 3) existing business models for café operations.
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Berjaya Food
Tapping new market segments and consumers via FMCG
BStarbucks plans to enter the FMCG segment and launch its Ready-To-Drink (RTD) products – i.e. bottled coffee drinks - by April-May 2016. During the initial phase, BFood will import the products directly from the US and sell them to local retailers (i.e. supermarkets and 7-Eleven convenient stores) via an appointed distributor, which currently has access to 4,000-5,000 channels. Subsequently, within a targeted 18-month timeframe, BFood will source for FMCG producer(s) to produce and bottle its RTD products – to replace the import structure and enhance profitability.
We understand gross margins could be about 40-50% and an additional 5- 10% once BStarbucks is able to produce its own RTD products via third- party producer(s). We have yet to include FMCG sales into our forecast until we can gauge its potential sales volume. Volume could also be potentially low during its initial phase. Nevertheless, we are positive on its FMCG venture in the long term as BStarbucks will be able to widen its product sales and branding domestically.
Existing Starbucks RTD outside Malaysia
Source: Company
Drive-through outlets enhance profitability
Drive-through outlets have been BFood’s star performers since the opening of its first kiosk in Seri Kembangan in the Klang Valley, due to their convenience and locations for customers. The Seri Kembangan outlet, for instance, is located along the busy North-South Highway and adjacent to a Petronas petrol station. Of Starbucks’ 195 Malaysian outlets, 19 (~10% of total Starbucks outlets) are drive-throughs and it intends to open another two drive-through outlets within the next few months. We understand Petronas has offered BFood the opportunity to establish its Starbucks outlet at over 30 of its petrol stations in Peninsular Malaysia. BFood is also in talks with another leading petrol station operator in Malaysia for a similar business model. Management, however, will continue to be selective in its locations so as to maintain profitability.
We are optimistic on the increase in drive-through outlets, given potentially strong customer traffic fed by roads/highways with high traffic flow, locations with limited car park and centralised areas. We understand that certain drive-through outlets could generate over MYR250,000 in sales per quarter, while key performing outlets could go beyond MYR500,000 in sales, based on past performances. We also understand that drive-throughs established within petrol stations generally have lower rents, as compared to outlets inside a mall, which translates to lower operating expenses.
November 10, 2015 18
Berjaya Food
Starbucks drive-through outlets in Tanjung Tokong, Penang and Port Dickson, Negeri Sembilan (left to right)
Source: Company
M&A channel for BCorp’s F&B?
There could be opportunities for BFood to acquire more F&B brands from its parent, Berjaya Corporation Bhd (“BCorp”), subject to various suitability criteria and prospects. F&B brands in Malaysia under BCorp are Wendy’s, Krispy Kreme Doughnuts and Papa John’s Pizza.
In our view, Papa John’s Pizza could be the next injection into BFood but it will be a long-term plan for BFood at this juncture, estimated after 2-3 years. Papa John has 22 outlets in Kuala Lumpur, Selangor, Ipoh and Melaka. It has yet to turn profitable and we think it would be a better M&A candidate once it shows a turnaround and has better economies of scale, e.g. with over 40 outlets.
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Berjaya Food
Earnings & Financials Outlook
Revenue and operating profit forecasts of major contributing entities Fin YE: Apr (MYRm) FY14A FY15A* FY16E FY17E FY18E BStarbucks (MY) Revenue 301.4 346.5 370.3 436.3 508.3 Growth 28.7 15.0 6.9 17.8 16.5 EBIT 50.0 53.7 49.7 66.7 78.8 Growth 62.0 7.3 -7.5 34.2 18.1 EBIT margin (%) 16.6 15.5 13.4 15.3 15.5
Avg. rev/outlet 1.77 1.80 1.82 1.91 2.01 SSSG (%) 16.0 -5.0 3.2 6.3 6.2 Net new outlets 28 23 25 25 25 KRR (MY) Revenue 96.0 101.9 97.7 98.7 102.2 Growth 0.3 6.2 -4.1 1.0 3.5 EBIT 12.1 8.3 6.5 6.9 7.5 Growth -21.6 -31.7 -20.9 6.0 7.9 EBIT margin (%) 12.6 8.1 6.7 7.0 7.3
Avg. rev/outlet 1.23 1.13 1.05 1.00 1.00 SSSG (%) -2.0 -7.0 -5.9 -3.7 0.8 Net new outlets 9 12 8 3 3 Jollibean (SG) * Revenue 38.0 39.0 41.8 45.0 47.7 Growth (% YoY) 3.7 2.7 7.2 7.6 6.0 EBIT 2.1 1.0 0.8 0.1 0.7 Growth (% YoY) -21.2 -53.0 -21.8 -86.1 571.3 EBIT margin (%) 5.6 2.6 1.9 0.2 1.5
Avg. rev/outlet 0.81 0.85 0.86 0.87 0.89 SSSG (%) -2.0 -1.7 1.5 1.3 2.5 Net new outlets 0 -1 5 2 2 * Based on annual reports and/or company’s guidance Note: All entities are based on 100% stake for FY14-FY18 Source: Company, Maybank KE
Favourable three-year revenue CAGR of 22.5%...
We forecast BFood’s FY15-18 revenue to grow at a three-year CAGR of 22.5%, mainly attributed to:
1) BStarbucks (70% of FY16E revenue) in Malaysia with 13.6% CAGR. This is underpinned by: a) 25 new outlets p.a. which brings total FY18 outlets to 268, from 193 as at end-FY15; and b) average revenue per outlet in FY16/17/18 to grow at 2%/5%/5% YoY p.a. which we deem to be conservative vs management’s expectation of double-digit SSSG.
2) KRR in Malaysia (18% of FY16E revenue) with a marginal 0.1% CAGR. This is on the back of: a) 8/3/3 new outlets in FY16/17/18, which brings total FY18 outlets to 104, from 90 as at end-FY15; and b) -7%/-5%/0% YoY growth in FY16/17/18 average revenue per outlet in view of the more challenging/competitive market for KRR.
November 10, 2015 20
Berjaya Food
3) KRR in Indonesia (2% of FY16E revenue) with 8.5% CAGR. As KRR is relatively new in the Indonesian restaurant market (first outlet in FY12), we expect the near-term outlook to remain challenging with FY16/17/18 average revenue per outlet to grow -5%/-3%/0%. Meanwhile, net new store openings are estimated at -3/2/2 as we understand six loss-making outlets were closed down in 2QFY16.
4) Jollibean in Singapore (8% of FY16E revenue) with 6.9% CAGR. We forecast JB to open five new outlets in FY16 followed by two outlets p.a. for the following years, with an estimated 2% annual growth in average revenue per outlet.
…and even stronger three-year earnings CAGR of 29.5%
We expect the group’s bottomline to expand at an even faster pace, largely driven by:
1) 22.5% three-year revenue CAGR, mainly from aggressive plans to open 75 Starbucks outlets in Malaysia by end-FY18.
2) Gradual increment in BStarbucks’ operating margin in tandem with more new outlets and better economies of scale for operating costs. (Please refer to the section on “Risks” in page 25 for earnings sensitivity from the forex impact.)
3) Some additional improvement in bottomline margins on expectation that BFood will pare down about 11-13% of its long- term borrowings p.a. (MYR187m as at end-FY15).
Expect earnings growth to pick up in following quarters
1QFYE4/16 continued to be a weak quarter for the group, with net profit rising just 1.7% YoY. BStarbucks’ SSSG was -7% YoY and -13% YoY for BRoasters, owing to slower consumer spending post-GST implementation as well as the Muslim fasting month.
Nevertheless, what is positive is that BStarbucks had recorded positive double-digit SSSG of about 14-16% in the first two months of 2QFY16 (Aug- Sep 2015) while BFood has closed down six loss-making KRR outlets in Indonesia. These developments should contribute to stronger earnings expansion in 2QFY16. We expect the upward trajectory to persist into 3QFY16 and 4QFY16 in conjunction with the year-end and Chinese New Year (February 2016) festive seasons.
BFood: 1QFY16 results summary FYE Apr (MYR’m) 1QFY16 1QFY15 % YoY 4QFY15 % QoQ Revenue 132.4 39.6 234.1 128.9 2.7 Operating profit 11.9 1.0 1,085.1 13.1 (9.1) Pretax profit 8.9 6.3 43.0 10.1 (11.1) Net profit 6.1 6.0 1.7 6.4 (4.8)
1QFY16 1QFY15 +/- ppt 4QFY15 +/- ppt Operating margin (%) 9.0 2.5 6.5 10.1 (1.2) Net margin (%) 4.6 15.1 (10.5) 5.0 (0.4) Note: BStarbucks only contributed 50% associates’ profit to BFood prior to 2QFY15 Source: Company
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Berjaya Food
BFood: Quarterly revenue and pre-tax profit margin
Revenue (LHS) Pretax profit margin (RHS) (RMm) (%) 160 Acquired remaining 50% 25 140 stake in BStarbucks 20 120 100 15 80 60 10 40 5 20
0 0
2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 1QFY14 Note: BStarbucks only contributed 50% associates’ profit to BFood prior to 2QFY15 Source: Company
Dividend payout ratio of up to 50%
BFood’s dividend policy is to distribute up to 50% of its earnings p.a. from FY14 onwards. The company paid 51%/84% of its FY14/15 core earnings and we forecast a 50% payout for FY16-18 in tandem with its strong earnings potential. This translates into FY16/17/18 net yields of 1.3/1.8/2.2%. We view BFood as a growth stock as opposed to a dividend stock.
Gearing, capex at a manageable level
With FY16 being the first full year of a 100% stake in BStarbucks following BFood’s acquisition of the remaining 50% stake in Sep 2014 (MYR279.5m), we estimate end-FY16’s net gearing to be at 38% (end-FY15 at 40%). Subsequently, we estimate BFood to pare down about MYR20m-25m p.a. of its long-term borrowings, bringing down FY17/18 net gearing to 34/28%.
Elsewhere, we expect near-term capex to be non-excessive, at MYR32-35m p.a., largely for new outlet openings with an assumed capex of MYR0.7m/ 1.0m per new KRR/BStarbucks outlet. We do not think BFood would need to raise capital to support its expansion plans given its healthy operating cashflow. Hence, we expect a steady stream of free cash flow per share of 4.6/8.9/12.2sen for FY16/17/18 which is adequate to support its dividend policy to pay up to 50% of its earnings. We project FY16/17/18 net DPS at 3.3/4.6/5.6sen.
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Berjaya Food
Valuations
Initiate with BUY and MYR3.10 TP
We initiate BFood with a BUY rating and a MYR3.10 TP pegged to 22.5x CY17 PER (at -0.5SD of its one-year forward PER mean, after its mid-2012 acquisition of BStarbucks), offering 23% total return. Our 22.5x (-0.5SD) PER peg is more in line with major Malaysian consumer PLCs’ forward valuations such as QL Resources and 7-Eleven Malaysia. We like BFood for its strong earnings growth catalysts from BStarbucks (three-year net profit CAGR of 29.5%) and decent valuations. Our 3-year earnings CAGR forecast of 29.5% implies a 0.79x PEG (CY16), which is not excessive.
Compared to the Malaysian consumer sector, BFood is currently trading at 23.4x CY16 FD PER versus the average of 18.6x for the Malaysian consumer sector. However, BFood has a stronger earnings CAGR potential compares against a two-year EPS CAGR of just 4.2% for the sector. Meanwhile, Starbucks Corp in US trades at 31.6x CY16 PER, a significantly huge gap to BFood’s 23.4x. Starbucks Corp’s consensus 2-year forward earnings CAGR of 18.7% is also below BFood’s 22.4%, based on our estimates.
We think there are no direct comparable peers to BFood in Malaysia, particularly to BStarbucks which operates beverage-centric cafés. Its closest listed F&B peer is Oldtown Bhd which is primarily focused on dining-centric café operations (serving mainly local delights) and FMCG.
BFood: One-year forward PER BFood: One-year forward P/BV PE (x) PB (x) 50 4.5 45 40 4.0 35 +1SD, 36.2 3.5 +1SD, 3.3 30 3.0 25 Mean, 27.0 Mean, 2.9 20 2.5 -1SD, 17.8 -1SD, 2.4 15 2.0 10 5 1.5
0 1.0
Jun-15 Jun-12 Jun-13 Jun-14
Sep-12 Sep-13 Sep-14 Sep-15
Mar-13 Mar-14 Mar-15
Dec-12 Dec-13 Dec-14
Jun-12 Jun-13 Jun-14 Jun-15
Sep-12 Sep-13 Sep-14 Sep-15
Mar-13 Mar-14 Mar-15
Dec-12 Dec-13 Dec-14
Source: Company, Maybank KE Source: Company, Maybank KE
Starbucks: Peer comparison Company Share Market Target PER Gross Yield ROE P/BV EPS CAGR Price Cap Price CY15 CY16 CY15 CY16 CY15 CY16 CY15 CY16 CY14-16 (Local) (USD m) (MYR) (x) (x) (%) (%) (%) (%) (x) (x) (%) Starbucks Corp 61.97 91976 Non- 37.4 31.6 1.1 1.3 47.5 41.8 15.3 13.6 18.7 rated Berjaya Food 2.56 225 3.1 31.1 23.1 1.9 2.2 8.7 10.1 2.4 2.3 22.4 Source: Bloomberg, Maybank KE
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Malaysia: Consumer sector summary Company Share Market Target PER Net Yield ROE P/BV EPS CAGR Price Cap Price CY15 CY16 CY15 CY16 CY15 CY16 CY15 CY16 CY14-16
(MYR) (MYR m) (MYR) (x) (x) (%) (%) (%) (%) (x) (x) (%)
BAT 59.94 17,115 57.00 18.3 18.3 5.4 5.8 175.3 168.5 31.4 30.3 1.8 Nestle 72.40 16,978 68.80 28.1 27.2 3.5 3.6 76.9 77.9 21.4 21.0 6.5 Aeon 2.90 4,072 2.85 24.6 20.3 1.3 1.6 9.0 10.3 2.2 2.0 (6.1) QL Resources 4.16 5,192 4.00 25.4 22.9 1.2 1.2 13.9 14.0 3.4 3.1 13.2 Guinness 14.10 4,260 14.00 19.7 19.3 5.1 5.2 57.4 58.1 11.0 10.3 3.6 Carlsberg 11.88 3,655 12.20 17.6 16.8 5.6 5.9 66.7 69.2 11.4 10.6 1.0 MSM 4.94 3,473 5.50 12.6 12.6 5.2 4.9 13.8 12.6 1.7 1.6 3.6 7-Eleven 1.42 1,717 1.50 29.6 24.1 1.7 2.1 23.6 25.7 6.5 5.7 12.0 Padini 1.65 1,086 1.30 13.2 12.2 6.1 6.1 20.2 20.8 2.6 2.5 2.1 Oldtown 1.40 632 1.45 13.2 12.0 4.2 4.6 13.1 13.4 1.7 1.6 5.0 Berjaya Food 2.56 959 3.1 31.1 23.1 1.4 1.6 8.7 10.1 2.4 2.3 22.4 Simple average (excluding BFood) 20.2 18.6 3.9 4.1 47.0 47.0 9.3 8.9 4.3 Source: Bloomberg, Maybank KE
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Risks
Intense competition
On top of the existing chains of specialty coffee cafés such as The Coffee Bean & Tea Leaves, San Francisco Coffee, Dome, and Gloria Jean’s Coffee, we note that single/non-chain specialty coffee cafés have mushroomed in recent years, especially within the Klang Valley. This could affect BStarbucks’ market share despite creating a larger selection of cafés for consumers. Competition for KRR has also remained strong, with competitors such as Nando’s, Chicken Rice Shop and RasaMas (formerly Rasa Ayamas).
However, we believe positive factors such as brand awareness, brand loyalty, and high number of outlets play major roles and would be advantages for BStarbucks and KRR over their competitors.
Downturn in consumer sentiment
BFood’s sales could be affected by the downward cycle of the retail sector as BFood’s business is predominantly F&B. This could be attributed to various macro factors such as inflationary pressure, weak commodity prices and volatility in the local currency, which would eventually lead to slower consumer spending. While consumer sentiment has remained softer in recent quarters (based on Malaysian Institute of Economic Research’s Consumer Sentiment Index), we anticipate some recovery towards the end of 2015 and early 2016 in conjunction with several festive seasons.
MIER: Consumer Sentiment Index (CSI)
CSI 5-year mean
140 120 103.5 100 80 71.7 60 40 20
0
1Q12 4Q10 1Q11 2Q11 3Q11 4Q11 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q10 Source: Malaysian Institute of Economic Research (MIER)
Appreciating USD against MYR
As about 40% of BFood’s cost of sales is denominated in USD (i.e. frappuccino mix, milk and merchandises/premium items from US), a less favourable movement of the MYR against the USD would result in higher costs. Nonetheless, most of its USD-denominated production items are locked in for one year at predetermined forex rates, which could partly lessen the fluctuation in USD/MYR. We note that for every +/-10% in USD/MYR, BFood’s net profit is estimated to decrease/increase by MYR2.1m (8% of FY15 core net profit).
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Forex: USD/MYR (USD/MYR) 5.00
4.50
4.00
3.50
3.00
2.50
Jul-11 Jul-12 Jul-13 Jul-14 Jul-15
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Jan-15 Jan-11 Jan-12 Jan-13 Jan-14
Oct-12 Oct-13 Oct-14 Oct-15 Oct-11 Note: 1USD: MYR Source: Bloomberg
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FYE 30 Apr FY14A FY15A FY16E FY17E FY18E Key Metrics P/E (reported) (x) 30.2 5.4 28.8 21.0 17.2 Core P/E (x) 30.2 37.3 28.8 21.0 17.2 Core FD P/E (x) 36.8 37.7 29.2 21.3 17.5 P/BV (x) 4.2 2.4 2.3 2.2 2.1 P/NTA (x) 4.7 (18.1) (26.5) (71.8) 66.1 Net dividend yield (%) 1.3 1.7 1.3 1.8 2.2 FCF yield (%) nm 2.0 1.8 3.5 4.8 EV/EBITDA (x) 26.2 5.1 14.7 11.7 10.0 EV/EBIT (x) 52.7 5.9 21.0 15.6 12.9
INCOME STATEMENT (MYR m) Revenue 150.4 376.8 531.5 607.5 693.2 Gross profit 59.7 169.0 236.3 266.5 306.4 EBITDA 14.6 213.7 75.3 93.6 108.3 Depreciation 7.3 28.5 22.5 23.4 24.5 Amortisation 0.0 0.0 0.0 0.0 0.0 EBIT 7.3 185.2 52.8 70.3 83.8 Net interest income /(exp) (0.2) (8.9) (7.6) (7.0) (6.2) Associates & JV 17.5 6.5 0.0 0.0 0.0 Exceptionals 0.0 0.0 0.0 0.0 0.0 Other pretax income 0.0 0.0 0.0 0.0 0.0 Pretax profit 24.6 182.8 45.3 63.3 77.5 Income tax (4.5) (11.7) (13.6) (19.0) (23.3) Minorities 2.6 6.5 1.6 1.4 1.5 Perpetual securities 0.0 0.0 0.0 0.0 0.0 Discontinued operations 0.0 (151.9) 0.0 0.0 0.0 Reported net profit 22.7 177.6 33.3 45.8 55.8 Core net profit 22.7 25.7 33.3 45.8 55.8
BALANCE SHEET (MYR m) Cash & Short Term Investments 17.7 36.9 12.6 3.0 1.0 Accounts receivable 19.4 38.8 43.7 48.3 53.2 Inventory 4.3 30.5 44.5 48.3 55.1 Reinsurance assets 0.0 0.0 0.0 0.0 0.0 Property, Plant & Equip (net) 38.9 155.5 164.9 174.7 185.0 Intangible assets 16.1 447.3 447.3 447.3 447.3 Investment in Associates & JVs 94.5 0.0 0.0 0.0 0.0 Other assets 2.0 5.2 5.6 5.8 6.0 Total assets 192.8 714.2 718.6 727.4 747.6 ST interest bearing debt 5.9 4.4 6.5 7.0 8.0 Accounts payable 17.0 86.8 96.5 101.6 112.4 Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0 LT interest bearing debt 0.0 186.6 161.6 141.6 121.6 Other liabilities 8.0 49.0 50.0 50.0 50.0 Total Liabilities 30.7 326.4 314.2 300.0 292.3 Shareholders Equity 162.8 394.4 411.1 434.0 461.8 Minority Interest (0.6) (6.6) (6.6) (6.6) (6.6) Total shareholder equity 162.1 387.8 404.5 427.3 455.2 Perpetual securities 0.0 0.0 0.0 0.0 0.0 Total liabilities and equity 192.8 714.2 718.6 727.4 747.6
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CASH FLOW (MYR m) Pretax profit 24.6 182.8 45.3 63.3 77.5 Depreciation & amortisation (7.3) (28.5) (22.5) (23.4) (24.5) Adj net interest (income)/exp 0.0 0.0 0.0 0.0 0.0 Change in working capital 4.1 24.1 (6.6) (2.7) 0.3 Cash taxes paid 0.0 0.0 0.0 0.0 0.0 Other operating cash flow (1.9) (5.2) (11.9) (17.5) (21.8) Cash flow from operations 10.6 57.1 49.3 66.5 80.6 Capex (15.8) (40.4) (31.9) (33.1) (34.8) Free cash flow (5.2) 16.7 17.3 33.3 45.9 Dividends paid 0.0 (20.9) (16.7) (22.9) (27.9) Equity raised / (purchased) 0.0 0.0 0.0 0.0 0.0 Perpetual securities 0.0 0.0 0.0 0.0 0.0 Change in Debt 0.0 0.0 (25.0) (20.0) (20.0) Perpetual securities distribution 0.0 0.0 0.0 0.0 0.0 Other invest/financing cash flow 5.0 22.2 0.0 0.0 0.0 Effect of exch rate changes 0.6 0.3 0.0 0.0 0.0 Net cash flow 0.4 18.2 (24.3) (9.6) (2.0)
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FYE 30 Apr FY14A FY15A FY16E FY17E FY18E Key Ratios Growth ratios (%) Revenue growth 23.3 150.6 41.1 14.3 14.1 EBITDA growth (25.1) 1,359.7 (64.8) 24.3 15.6 EBIT growth (40.9) 2,439.8 (71.5) 33.1 19.2 Pretax growth 15.1 642.1 (75.2) 39.8 22.5 Reported net profit growth 22.0 681.4 (81.2) 37.3 21.9 Core net profit growth 22.0 13.0 29.8 37.3 21.9
Profitability ratios (%) EBITDA margin 9.7 56.7 14.2 15.4 15.6 EBIT margin 4.8 49.2 9.9 11.6 12.1 Pretax profit margin 16.4 48.5 8.5 10.4 11.2 Payout ratio 38.0 9.1 37.5 37.5 37.5
DuPont analysis Net profit margin (%) 15.1 47.1 6.3 7.5 8.0 Revenue/Assets (x) 0.8 0.5 0.7 0.8 0.9 Assets/Equity (x) 1.2 1.8 1.7 1.7 1.6 ROAE (%) 14.9 9.2 8.3 10.8 12.5 ROAA (%) 12.6 5.7 4.7 6.3 7.6
Liquidity & Efficiency Cash conversion cycle (2.3) (32.1) (38.1) (28.4) (25.2) Days receivable outstanding 44.3 27.8 27.9 27.2 26.3 Days inventory outstanding 16.1 30.1 45.7 49.0 48.1 Days payables outstanding 62.7 90.0 111.8 104.6 99.6 Dividend cover (x) 2.6 11.0 2.7 2.7 2.7 Current ratio (x) 1.7 0.8 0.7 0.7 0.7
Leverage & Expense Analysis Asset/Liability (x) 6.3 2.2 2.3 2.4 2.6 Net debt/equity (%) net cash 39.1 37.8 33.6 27.9 Net interest cover (x) 47.7 20.8 7.0 10.1 13.5 Debt/EBITDA (x) 0.4 0.9 2.2 1.6 1.2 Capex/revenue (%) 10.5 10.7 6.0 5.5 5.0 Net debt/ (net cash) (11.8) 154.2 155.5 145.6 128.6 Source: Company; Maybank
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Berjaya Food
Research Offices
REGIONAL HONG KONG / CHINA INDONESIA Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 Sadiq CURRIMBHOY Howard WONG Head of Research Isnaputra ISKANDAR Head of Research [email protected] Regional Head, Research & Economics (852) 2268 0648 (62) 21 2557 1129 • Energy • Petrochem (65) 6231 5836 [email protected] [email protected] [email protected] • Oil & Gas - Regional • Strategy • Metals & Mining • Cement WONG Chew Hann, CA Termporn TANTIVIVAT (66) 2658 6300 ext 1520 Regional Head of Institutional Research Benjamin HO Rahmi MARINA (852) 2268 0632 [email protected] (62) 21 2557 1128 [email protected] (603) 2297 8686 [email protected] • Property • Consumer & Auto [email protected] ONG Seng Yeow • Banking & Finance Regional Head of Retail Research Jacqueline KO, CFA Jaroonpan WATTANAWONG (65) 6231 5839 (852) 2268 0633 [email protected] Aurellia SETIABUDI (66) 2658 6300 ext 1404 [email protected] • Consumer Staples & Durables (62) 21 2953 0785 [email protected] [email protected] • Transportation • Small cap TAN Sin Mui Ka Leong LO, CFA • Property (852) 2268 0630 [email protected] Director of Research VIETNAM (65) 6231 5849 [email protected] • Consumer Discretionary & Auto Pandu ANUGRAH (62) 21 2557 1137 Mitchell KIM LE Hong Lien, ACCA ECONOMICS [email protected] Head of Institutional Research (852) 2268 0634 [email protected] • Infra • Construction • Transport• Telcos • Internet & Telcos (84) 8 44 555 888 x 8181 Suhaimi ILIAS [email protected] Chief Economist Janni ASMAN Osbert TANG, CFA (62) 21 2953 0784 • Strategy • Consumer • Diversified • Utilities Singapore | Malaysia (86) 21 5096 8370 (603) 2297 8682 [email protected] [email protected] [email protected] • Cigarette • Healthcare • Retail THAI Quang Trung, CFA, Deputy Manager, Luz LORENZO • Transport & Industrials Institutional Research Philippines Adhi TASMIN (84) 8 44 555 888 x 8180 (63) 2 849 8836 Steven ST CHAN (62) 21 2557 1209 [email protected] [email protected] (852) 2268 0645 [email protected] [email protected] • Real Estate • Construction • Materials • Banking & Financials - Regional • Plantations Tim LEELAHAPHAN Le Nguyen Nhat Chuyen Thailand Warren LAU PHILIPPINES (84) 8 44 555 888 x 8082 (66) 2658 6300 ext 1420 (852) 2268 0644 [email protected] [email protected] [email protected] Luz LORENZO Head of Research • Oil & Gas • Technology – Regional JUNIMAN (63) 2 849 8836 [email protected] NGUYEN Thi Ngan Tuyen, Head of Retail Research Chief Economist, BII INDIA Indonesia • Strategy (84) 8 44 555 888 x 8081 (62) 21 29228888 ext 29682 • Utilities • Conglomerates • Telcos [email protected] Jigar SHAH Head of Research • Food & Beverage • Oil&Gas • Banking [email protected] (91) 22 6623 2632 [email protected] Lovell SARREAL (63) 2 849 8841 • Oil & Gas • Automobile • Cement TRINH Thi Ngoc Diep STRATEGY [email protected] (84) 4 44 555 888 x 8208 Anubhav GUPTA • Consumer • Media • Cement Sadiq CURRIMBHOY [email protected] (91) 22 6623 2605 [email protected] Global Strategist Rommel RODRIGO • Technology • Utilities • Construction • Metal & Mining • Capital Goods • Property (65) 6231 5836 [email protected] (63) 2 849 8839 Vishal MODI [email protected] PHAM Nhat Bich Willie CHAN • Conglomerates • Property • Gaming (84) 8 44 555 888 x 8083 (91) 22 6623 2607 [email protected] Hong Kong / Regional • Ports/ Logistics [email protected] (852) 2268 0631 [email protected] • Banking & Financials • Consumer • Manufacturing • Fishery Katherine TAN Abhijeet KUNDU MALAYSIA (63) 2 849 8843 NGUYEN Thi Sony Tra Mi (91) 22 6623 2628 [email protected] [email protected] (84) 8 44 555 888 x 8084 WONG Chew Hann, CA Head of Research • Consumer • Banks • Construction [email protected] (603) 2297 8686 [email protected] • Port operation • Pharmaceutical • Strategy Neerav DALAL Michael BENGSON (63) 2 849 8840 • Food & Beverage (91) 22 6623 2606 [email protected] Desmond CH’NG, ACA [email protected] (603) 2297 8680 • Software Technology • Telcos • Conglomerates TRUONG Quang Binh [email protected] (84) 4 44 555 888 x 8087 • Banking & Finance SINGAPORE Jaclyn JIMENEZ [email protected] (63) 2 849 8842 • Rubber plantation • Tyres and Tubes • Oil&Gas LIAW Thong Jung Gregory YAP (603) 2297 8688 [email protected] [email protected] (65) 6231 5848 [email protected] • Consumer • Oil & Gas Services- Regional • SMID Caps ONG Chee Ting, CA • Technology & Manufacturing • Telcos Arabelle MAGHIRANG (603) 2297 8678 [email protected] (63) 2 849 8838 YEAK Chee Keong, CFA • Plantations - Regional [email protected] (65) 6231 5842 • Banks Mohshin AZIZ [email protected] (603) 2297 8692 [email protected] • Offshore & Marine THAILAND • Aviation - Regional • Petrochem Derrick HENG, CFA YIN Shao Yang, CPA Maria LAPIZ Head of Institutional Research (65) 6231 5843 [email protected] Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (603) 2297 8916 [email protected] • Transport • Property • REITs (Office) • Gaming – Regional • Media [email protected] • Consumer • Materials • Ind. Estates TAN Chi Wei, CFA Joshua TAN (603) 2297 8690 [email protected] (65) 6231 5850 [email protected] Sittichai DUANGRATTANACHAYA • Power • Telcos • REITs (Retail, Industrial) (66) 2658 6300 ext 1393 WONG Wei Sum, CFA John CHEONG [email protected] (603) 2297 8679 [email protected] (65) 6231 5845 [email protected] • Services Sector • Transport • Property • Small & Mid Caps • Healthcare Sukit UDOMSIRIKUL Head of Retail Research LEE Yen Ling TRUONG Thanh Hang (66) 2658 6300 ext 5090 (603) 2297 8691 [email protected] (65) 6231 5847 [email protected] [email protected] • Building Materials • Glove • Ports • Shipping • Small & Mid Caps CHAI Li Shin, CFA Mayuree CHOWVIKRAN (603) 2297 8684 [email protected] (66) 2658 6300 ext 1440 [email protected] • Plantation • Construction & Infrastructure • Strategy Ivan YAP (603) 2297 8612 [email protected] Padon VANNARAT • Automotive • Semiconductor • Technology (66) 2658 6300 ext 1450 [email protected] Kevin WONG • Strategy (603) 2082 6824 [email protected] • REITs • Consumer Discretionary Surachai PRAMUALCHAROENKIT LIEW Wei Han (66) 2658 6300 ext 1470 (603) 2297 8676 [email protected] [email protected] • Consumer Staples • Auto • Conmat • Contractor • Steel LEE Cheng Hooi Regional Chartist (603) 2297 8694 Suttatip PEERASUB [email protected] (66) 2658 6300 ext 1430 [email protected] Tee Sze Chiah Head of Retail Research • Media • Commerce (603) 2297 6858 [email protected] Cheah Chong Ling (603) 2297 8767 [email protected]
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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
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DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 10 November 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 10 November 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
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Malaysia Singapore London New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc Bursa Malaysia Securities Berhad) 50 North Canal Road 5th Floor, Aldermary House 777 Third Avenue, 21st Floor 33rd Floor, Menara Maybank, Singapore 059304 10-15 Queen Street New York, NY 10017, U.S.A. 100 Jalan Tun Perak, London EC4N 1TX, UK 50050 Kuala Lumpur Tel: (65) 6336 9090 Tel: (212) 688 8886 Tel: (603) 2059 1888; Tel: (44) 20 7332 0221 Fax: (212) 688 3500 Fax: (603) 2078 4194 Fax: (44) 20 7332 0302
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Malaysia Thailand Rommel Jacob Tanasak Krishnasreni [email protected] [email protected] Tel: (603) 2717 5152 Tel: (66)2 658 6820
Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177
New York India Andrew Dacey Manish Modi [email protected] [email protected] Tel: (212) 688 2956 Tel: (91)-22-6623-2601
Vietnam Philippines Tien Nguyen Keith Roy [email protected] [email protected] Tel: (84) 44 555 888 x8079 Tel: (63) 2 848-5288 www.maybank-ke.com | www.maybank-keresearch.com
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