Japan Foods Holding Ltd SGX: 5OI - Strong Earnings Recovery on the Cards; Still BUY
Keep BUY and SGD0.55 TP, 31% upside and c.6% FY23F (Mar) yield. Japan Foods’ FY22 reported profit exceeded our estimate. With monthly revenue at its restaurants returning to pre-pandemic levels within the first few months of relaxation of COVID-19 restrictions in Singapore, and JFOOD looking to aggressively grow its number of outlets, we expect strong growth over FY23F-25F, with profit quickly reverting to FY19 levels. Our FY21-22 recurring profit excluded the government grants to make the forecast numbers comparable.
FY22 earnings in line. FY22 reported profit of SGD3.2m, was significantly ahead of our estimate of SGD2.8m. This was largely aided by a strong recovery in customer footfall across all its restaurants and higher sales intensity for its new halal brand restaurants during 2HFY22. The halal restaurants accounted for c.21% of FY22 revenue. As at Mar 2022, it had 56 restaurants in Singapore (Mar 2021: 50), while the number of halal restaurants increased to nine (Mar 2021: one). JFOOD noted that monthly revenue for its restaurants at suburban malls has reverted back to pre- pandemic levels.
Return of outlet expansion. The group is looking to add seven new restaurants in FY23, of which five would be halal restaurants. Out of the five halal restaurants, it has already opened two restaurants in the current quarter. We conservatively estimate JFOOD to have 60 restaurants by end Mar 2023. This translates to FY23F capex of SGD4.5m.
There is cost pressure, but confident of maintaining margin. Growth in the number of outlets would also mean YoY higher operating costs, especially from increased labour and input expenses. However, JFOOD remains confident of being able to sustain its margins due to its efficient central kitchen operations and improved labour productivity. The group is focusing on diversifying its raw material sourcing, while keeping the costs under control. It was able to keep its gross margin above 84% throughout the pandemic (FY22: 84.6%). We estimate FY23 gross margin at 84.4%.
Large cash balance opens up growth opportunities. As at Mar 2022, JFOOD had no borrowings and a cash balance of SGD23m (c.43% of market cap). It believes this large cash balance gives it a buffer to survive any unexpected decline in economic activity and also provides it with sufficient firepower to aggressively expand the number of outlets in Singapore or regionally, if needed.
High dividend yield. As disclosed earlier, JFOOD announced 100% of net profit to be paid as dividends in FY22, which it expects to sustain in the future. We estimate its dividend yield at >5% for FY23F-25F.
ESG. JFOOD’s score is 3.0. As this is in line with the country median score, we ascribe a 0% premium/discount to its fair value to arrive at our TP.
Source: RHB Research - 27 May 2022
https://sgx.i3investor.com/servlets/ptres/15617.jsp
Singapore Investment
-
-
-
-
SingTel – Healthy core business3 hours ago
-
-
-
-
-
-
-
-
-
Retire in Japan: The Complete Guide14 hours ago
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Finance Investment Movement 452 days ago
-
-
-
-
-
-
-
-
Quick Update4 days ago
-
Would you rather…4 days ago
-
-
-
-
Market Weekly Outlook5 days ago
-
What is a Mother?6 days ago
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Post-BTO Sales Liquidity1 week ago
-
-
Monthly IBKR Update – Apr 20241 week ago
-
-
-
-
-
-
-
China’s going downhill?1 week ago
-
-
No new investment for retirees2 weeks ago
-
-
The Story Behind Maybank2 weeks ago
-
Mar 2024 Portfolio2 weeks ago
-
-
Portfolio Update Apr 20242 weeks ago
-
-
Portfolio Summary for April 20242 weeks ago
-
Portfolio (April 30, 2024)2 weeks ago
-
Summary of April 20242 weeks ago
-
Portfolio -- Apr 20242 weeks ago
-
-
-
-
-
That Restless Night…2 weeks ago
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2024 (Portfolio Update)1 month ago
-
-
1Q 2024 Investment Strategy Update1 month ago
-
-
-
Burnt out!1 month ago
-
-
Feb 2024 Expenditure1 month ago
-
-
New Bitcoin All Time High Before Halving2 months ago
-
-
-
-
-
-
The Market Is A Scam!2 months ago
-
-
-
-
-
Options Trading Journal Jan 20243 months ago
-
-
-
-
-
End of 2023 Review4 months ago
-
-
Year 2023 DIYQuant Portfolio Performance Report4 months ago
-
Monthly Summary of November 20235 months ago
-
3 Simple Poker Strategies for Beginners5 months ago
-
Migration of website5 months ago
-
-
-
-
-
-
-
-
-
August 2023 Portfolio Updates8 months ago
-
-
-
-
Hello SP Group, I'm Back!10 months ago
-
-
-
-
A New Light1 year ago
-
-
-
-
-
-
-
Demoralized1 year ago
-
2022 Thoughts, Hello 2023!1 year ago
-
Series of Defaults for Maple Finance1 year ago
-
Takeaways from “Sea Change”1 year ago
-
-
Greed is Coming Back1 year ago
-
-
-
-
-
-
-
-
-
-
-
What is Overemployment1 year ago
-
-
-
-
-
-
-
-
-
-
-
Home
Ltd SGX
SGX
Japan Foods Holding Ltd SGX: 5OI - Strong Earnings Recovery on the Cards; Still BUY