AnalysisBursa

6 things I learned from the 2020 Berjaya Food AGM

Listed in 2009 on the Bursa Stock Exchange, Berjaya Food Berhad is almost synonymous with Starbucks in Malaysia. As at June 2020, it owns 316 Starbucks stores in the country. It also operates Kenny Rogers Roasters in Malaysia, Starbucks in Brunei, and Jollibean in both Singapore and Malaysia.

The food and beverage retail business bore the brunt of the COVID-19 pandemic as consumers visited shopping malls and dined in less. This also translated to reduced footfall to the company’s restaurants.

Here are six things I learned from the 2020 Berjaya Food AGM.

1. Revenue decreased by 19.8% to RM632.9 million and the company posted a net loss in 2020 because of the COVID-19 pandemic. In FY2020, only Starbucks retail stores in Malaysia recorded profits after tax while all of Berjaya Food’s other businesses slipped into the red.

The company’s retail business had to rely only on deliveries and takeaways for sales for more than a month as dine-in was prohibited during the Movement Control Order period in FY2020. Berjaya Food’s restaurants continue to operate below full capacity to adhere to social distancing rules.

Source: Berjaya Food 2020 annual report

2. Berjaya Food is cautious with its planned expansion and is set to open another 27 stores in 2021. A shareholder voiced that it was the right move to close the non-performing Kenny Rogers Roasters stores in 2020. The management continues to explore different Kenny Rogers Roasters store formats including small-format stores. The total number of stores operated by Berjaya Food are as follows:

Number of Stores201820192020
Starbucks, Malaysia260291316
Starbucks, Brunei443
Kenny Rogers Roasters, Malaysia818073
Jollibean, Singapore313233
Jollibean, Malaysia--5
Total376407430

Source: 2019 and 2020 Berjaya Food AGM presentation slides

3. The company has opened two Sala restaurants in Kuala Lumpur to diversify into the vegetarian/vegan retail F&B business in Malaysia. Sala sells vegetarian alternatives and plant-based foods to cater to the growing interest of vegetarianism and veganism. It currently owns two outlets and is in the midst of opening a third one in Desa Park City, Kuala Lumpur.

4. A number of shareholders raised questions regarding the company’s share buybacks. The company bought back about 5.4 million shares at an average price of RM1.32 per share in FY2020. The shares were last bought in February 2020. Non-executive director Tan Thiam Chai explained that the share buybacks were conducted as the share price dropped below the intrinsic value as evaluated by the management. No share buybacks were done once the MCO began as the situation was more uncertain amidst business slowdowns. The management chose to conserve cash.

5. Total-debt-to-equity ratio stood at 0.9 in 2020 which is a bit high. At the same time, the company’s debt-servicing ratio hovered around 4.5 in the latest financial year, which means the company can service more than four years’ worth of interest expenses. New borrowings will only be considered once the market has become more stable according to Tan.

6. A shareholder asked why directors’ fees and remuneration increased during the pandemic. Tan explained that there was no increase in directors’ fees. The increase was due to the higher allowances provided to independent non-executive directors who are involved in work related to a newly formed sustainability committee. The allowance adjustment also includes future appointments for new directors.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

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