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AnalysisBursa

8 things I learned from the 2021 Berjaya Food AGM

Incorporated in 2009 and listed on Bursa Malaysia in 2011, Berjaya Food Berhad operates a number of food and beverage retail stores and restaurants across Malaysia, Singapore, and Brunei. The mainstay of the business is Starbucks Coffee and Kenny Rogers Roasters in Malaysia. Sala, a Tex-Mex, plant-based vegan restaurant, is the latest addition to the company’s umbrella.

As domestic business picks up, customers gradually return to their favourite Starbucks stores in Malaysia. Here are eight things I learned from the 2021 Berjaya Food AGM.

1. Revenue increased 13.3% year-on-year to RM717.3 million in 2021 because of higher same-store sales growth at 4% and the gradual relaxation of lockdown measures during the year. While the food delivery business became an important pillar to the group’s revenue when dine-in was not allowed, dine-in now takes up the lion’s share of the total revenue. CEO Sydney Lawrance Quays mentioned that the company managed to negotiate a low commission charge with food delivery companies, which is among the lowest in the industry.

2. Berjaya Food was back to the black in 2021 by registering a net profit of RM47.1 million compared to a net loss of RM19.6 million in 2020 driven by higher revenue and effective cost management. Rental rebates amounting to RM15 million were provided to the company in 2021 while two months’ worthof Starbucks Coffee franchise fees were waived in 2020 as a result of the pandemic. Dividend per share increased from 2 sen in 2020 to 3 sen in 2021.

3. As of June 2021, Berjaya Food had 443 cafes and restaurants across the three countries it operates –327 of which were Starbucks stores and was an increase from 316 stores in 2020. Starbucks has always been the major revenue contributor to Berjaya Food, making up 87.2% of the group’s revenue in 2021. Quays responded to a shareholder to that the Starbucks master franchise agreement will expire in 2040 and was renewed twice in the past without major changes.

4. Each year, the company targets to open 35 Starbucks stores as well as five Kenny Rogers Roasters, Jollibean and Sala stores each respectively. The management will focus on opening more new Starbucks stores including different store formats such as drive-through or curbside stores outside the Klang Valley as they are well received by customers. The annual capital expenditure is estimated to be RM90 million.

5. Total-debt-to-equity ratio dropped from 93.4% in 2020 to 76.4% in 2021 as Berjaya Food pared down its borrowings. Quays shared that the company will continue to reduce its gearing.

6. Quays does not foresee a huge impact from the sugar tax on the company’s business. In fact, the sugar tax has been in effect since 2019 and the company’s margin has not been affected. Anyway, Starbucks can leverage on its strong brand equity to raise prices should there be a drastic impact on the business.

7. A shareholder asked why the management had not given up on Kenny Rogers Roasters. The chairman believes the business will bounce back stronger as the economy gets back on track. I could feel myself agreeing with the shareholder as food served at Kenny Rogers Roasters is not particularly impressive (except the muffin which I like), and the retail F&B business scene is competitive in Malaysia.

8. Berjaya Food’s raw materials (mainly coffee beans) are largely sourced from Starbucks International which are usually pre-negotiated and shielded from rising commodity prices. The rest of the raw materials are hedged on a contractual basis approximately one to two years in advance.

The fifth perspective

2021 was a volatile year for a lot of businesses. Berjaya Food remained resilient — especially its Starbucks business — despite the disruptions brought on by the pandemic. The company’s short-term prospects look promising and Starbucks will continue to anchor the growth of Berjaya Food.

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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