BJFood: Earnings Dropped Sharply

Results Update

For QE30/4/2016, BJFood's net profit dropped by 57% q-o-q or 51% y-o-y to RM3 million while revenue was mix- dropped 6% q-o-q but rose 8% y-o-y to RM139 million. Revenue & profitS dropped q-o-q as the company came off its biggest quarter in terms of revenue and pre-tax profit in our financial year (QE31/1/2016) with the calendar year end festive sales, school holidays and Christmas season.


Table: BJFood's last 8 quarterly results

Looking at the quarterly P&L chart, we can see that BJFood's profit margins took a tumble in the last quarter, with PBT margin barely staying above the 5% and net profit margin at a mere 1.4%. This is attributed to "lower contribution from KRR operations in Malaysia as Malaysian consumers are cautious and prudent in their spending after the implementation of Goods and Services Tax ("GST") and also the steep depreciation of Ringgit Malaysia that had affected the profit margin of Berjaya Starbucks Coffee Company Sdn Bhd ("BStarbucks"). In addition, this quarter included an amount of about RM600,000 paid to Royal Malaysian Customs Department by BStarbucks for additional import duty and sales tax on purchases from its principal over the past few years."


Chart 1: BJFood's last 26 quarterly results on the left-hand side while on the right-hand side, the adjusted numbers (excluding the extraordinary gain of RM158.6 million recorded in QE31/10/2014) 

Valuation

BJFood (closed at RM1.83 yesterday) is now trading at a PE of 29 times (based on last 4 quarters' EPS of 6.3 sen. At this PER,  BJFood is deemed overvalued.

Technical Outlook

I plotted a 3-fan uptrend line onto the price chart. It looks like BJFood is on the 3rd (or lowest) uptrend line. A break below this uptrend line would mean the uptrend for this stock is over. Thus it is important that it must stay above RM1.80-1.85.

 
Chart 2: BJFood's weekly chart as at Jun 13, 2016 (Source: ShareInvestor.com)

Conclusion

Based on weak financial performance & demanding valuation, I would rate BJFood as a SELL or REDUCE.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, BJFood.