Koufu Group - CGS-CIMB Research 2021-02-25: In Recovery Mode


Koufu Group - In Recovery Mode

  • Koufu said footfall in Singapore’s suburban heartlands is improving but those in Singapore’s tourist areas, as well as in Macau, are still weak.
  • We pencil in a 39.7% y-o-y recovery in FY21F EPS. However, this will still be below FY19’s number as tourist footfall could still be wanting in FY21F.
  • We like Koufu’s market positioning and strong balance sheet. Reiterate ADD with an unchanged target price of S$0.94 as we roll forward to FY22F EPS.

2020 was a year to forget

  • Koufu (SGX:VL6) reported a FY20 revenue of S$192m (-19% y-o-y) on the back of lower outlet and mall management and F&B retail revenues, as it was hit by COVID-19 lockdowns across its operational regions (mainly Singapore and Macau).
  • FY20 core net profit (excluding S$3.4m impairment loss on PPE), fell 53.6% to S$13.4m saved by Singapore government grants to the tune of S$11.6m.

Footfall recovering, but still lagging in certain areas

  • In its 2H20 update, Koufu said it is still seeing good footfall at its heartland outlets, R&B tea kiosks, and 4 full-service restaurants, since the resumption of dine-in services. However, food courts at offices, downtown areas, tertiary institutions, and tourist hot-spots (i.e. its MBS food court) were still seeing low footfall due to travel restrictions and work-from-home initiatives.
  • Similarly in Macau, footfall remains low as tourist arrivals are still sluggish. We note that both Singapore’s and Macau’s borders are still largely shut.

Still reinforcing foothold; integrated facility still on track

  • Koufu revealed at its recent 4Q presentation release that it is still set to open three new food courts in 2Q21 (Sun Plaza, Woodlands Height, NTU). It is also optimistic of its Dough Culture franchise (acquisition completed in Jul 20).
  • As for its integrated facility, post a slight delay, it now expects to commence operations by 2Q21F, paving the way for better earnings when the world recovers from the pandemic, Koufu said.

FY21F net profit cut; introduce FY23F forecasts

  • We think our previous forecasts for Koufu in FY21F may have been too high as recovery in tourism for Singapore and Macau could take more time. Hence we cut our FY21F net profit by 9.1%. We trim our FY22F earnings per share forecast slightly as we think earnings will continue to recover. We introduce our FY23F earnings per share forecast which features a net profit growth of 9.3% y-o-y.

Reiterate ADD; strong balance sheet is still the main focus

  • We like Koufu as we deem it a resilient F&B play for its exposure to Singapore’s suburban heartlands. Moreover, a strong balance sheet (~S$62m net cash at end-Dec 20) accords it dry powder to weather volatile times and/or to cash in on potential M&As.
  • We reiterate ADD with an unchanged target price of S$0.94, pegged to 19x FY22F P/E (close to its 2018-19 average).
  • See Koufu Share Price; Koufu Target Price; Koufu Analyst Reports; Koufu Dividend History; Koufu Announcements; Koufu Latest News.
  • Potential re-rating catalysts include higher-than-expected store er improvement in F&B footfall. The reverse are downside risks.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-25
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