F&B stocks have been garnering investors’ interest due to their resilient nature, export exposure and also falling commodity prices. Besides, F&B remain challenging due to the dampened consumer sentiment post-GST implementation and series of administered price hikes.
PBT jumped 21% q-o-q on the back improved share of profits from its Singapore café outlets despite a marginal increase of 1% in revenues qoq. There are currently 9 café outlets in Singapore with 2 more slated to commence operations by end FY16.
The groups’ promotional activities have centered on value inducing purchases such as their “RM10 value meals” promotions. Moving into 2HFY16, its value inducing pricing strategy and discounting is expected to persist to attract customers. YTD revenues per outlet are down circa 12% on a yoy basis.
Its exports to China registered a slight decline y-o-y on the back of their distribution rationalization; however this is not reflexive of a drop in demand for OTWC products. Walmart has been signed on as a key player in their modern trade channel. Walmart has 450 stores across China.
Besides, its strong balance sheet position with net cash of RM151.0m (32.6 sen/share) provide further room for higher dividend pay-out which estimated at 6.0 sen/share and 6.5/share (yield: 4.3% & 4.6%) for FY16E & FY17E, respectively, based on a conservative pay-out ratio of c.52% vs 4-year’s average of 55%. Potential dividend yield might exceed 5% if the Group pays 60% of its earnings.
Kenanga Target price given RM 1.76