Koufu Group - CGS-CIMB Research 2020-08-12: More Dining-Out Post-Circuit Breaker


Koufu Group - More Dining-Out Post-Circuit Breaker

  • Koufu's 1H20 core net profit of S$4.0m deemed in line, down 72.6% y-o-y due to lower revenue (-23.2% y-o-y) and deferred recognition of rental waivers.
  • We expect a stronger 2H20F due to significant improvement in footfall in phase 2 and resumption of dine-in services. Reiterate ADD.
  • We believe the opening of more food courts, F&B stalls, integrated facilities in 2H20F and Dough Culture will underpin its FY21-22F revenue growth.

Koufu's 1H20 still profitable; core net profit decline of 73% y-o-y in line

  • Koufu (SGX:VL6) reported a 1H20 core net profit of S$4.0m (excluding S$1.5m impairment loss on PPE), which accounted for 24%/22% of our/consensus full-year numbers. We deem this in line as we expect stronger earnings recovery in 2H post-phase 2 reopening, with another S$5m-6m in government grants to be recognised.
  • While the rental rebates/waivers received from landlords have been passed on to its stall tenants, its lease modifications result in cost savings over an extended period (vs. FY20F).

More eating out, more socialising

  • Koufu's 1H20 topline fell 23.2% y-o-y to S$89.0m, with 19.4% y-o-y lower revenue from outlet and mall management (O&M) due to a decrease in fixed (S$2.7m) and variable (S$5.2m) rental income, and lower cleaning fees charged to stall tenants (S$3.5m). Revenue from the F&B segment (-27.2% y-o-y) was affected by lower footfall, restrictions on dine-in and the temporary suspension of 10 food courts, 5 restaurants and 26 R&B tea kiosks during the circuit breaker and phase 1 period.
  • Since reopening, Koufu has seen significant improvement in footfall and revenue at most of its food courts, R&B stalls and restaurants, except for those at tourist locations, near offices and education institutions.
  • We estimate negative same-store-sales growth (SSSG) of 15-20% in 2H, an improvement vs 2Q20’s -30-40% (in line with Singapore’s F&B services index ).

Expansion plans intact, albeit later opening

  • Despite some delay, Koufu will open its Nova City food court in Macau in 3Q20F, a new food court in Singapore and obtain TOP for its new integrated facility in 4Q20F.
  • Apart from reaping cost synergies from its recently acquired Dough Culture (see report: Koufu Group - CGS-CIMB Research 2020-07-01: Bringing In The Dough), we also expect more F&B stall openings to drive its FY21-22F topline. Koufu is also looking to roll out its own delivery app to more areas as increased frequency of takeaways and deliveries has become the new norm given the pandemic and capacity restrictions.

Reiterate ADD, with unchanged EPS and S$0.86 target price

  • We continue to like Koufu as a resilient F&B play with strong cash generation and balance sheet (S$72m net cash as of end Jun-20). Reiterate ADD, with an unchanged S$0.86 Target Price, pegged to 19x FY21F EPS (a 10% discount to the sector average of 21.3x).
  • Interim DPS of 0.5Scts was declared for 1H20 (1H19: 1Scts), within our expectations.
  • See Koufu Share Price; Koufu Target Price; Koufu Analyst Reports; Koufu Dividend History; Koufu Announcements; Koufu Latest News.
  • Potential Catalysts: higher-than-expected store wins and improvement in F&B footfall.
  • Risks are second wave of COVID-19 and poor overseas execution.

NGOH Yi Sin CGS-CIMB Research | Caleb PANG Huan Zhong CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-12
SGX Stock Analyst Report ADD MAINTAIN ADD 0.860 SAME 0.860