KUALA LUMPUR: Hong Leong Investment Bank Research has cut its target price for Starbucks Malaysia operator, Berjaya Food Bhd, from 30 sen to 20 sen, on negative near-term outlook for the company.
It has a "Sell" call on the stock, which was trading 4.9 per cent lower at 48 sen a share earlier.
BFood posted a loss after taxation and minority interest of RM81.0 million for financial year ended June 30, 2024 (FY2024) in line with HLIB Research's forecasted loss of RM81.2 million but missed street expectations of a loss of RM62.3 million.
FY24 figure was arrived after adjusting for losses arising for disposal of subsidiary company amounting to RM10.5 million.
In a note today, the firm said despite strong brand equity and active promotions, it expects boycott headwinds will stay, at least for the near term, which will greatly drag earnings.
HLIB Research said Starbucks still made up a big chunk of revenue for the fourth quarter ended June 30, 2024 contributing 89 per cent while the remaining came from Kenny Rogers Roasters (KRR) (8 per cent) and others.
It said with the tough business condition, the group has decided to take a pause on business expansion which resulted to no new stores opened for the quarter.
FY24 registered a total of 408 Starbucks stores with three stores permanently closed in the quarter due to the end of tenancy agreements.
The group also decided to temporarily close 25 inactive stores.
Paris Baguette store count remained stagnant at five stores in Malaysia with one new store opened in Philippines. KRR now has 60 stores with five store closures.
"To mitigate the challenging market conditions, the group is focusing on cost optimisation, labour productivity and effective marketing strategies."
"Additionally, we opine that sales will take time normalise considering the still intense Israel-Gaza conflict that is unfortunately seeing little signs of abating," it said.