KUALA LUMPUR: Berjaya Food Holdings Bhd (BFood) has hit pause on its expansion plans amid the ongoing boycott of Starbucks Malaysia due to the Israel-Palestine conflict.
Hong Leong Investment Bank (HLIB) research in a note today said the group's revenue was down by -24 per cent quarter-on-quarter and -48 per cent year-on-year on the back of the Starbucks boycott that's been ongoing since Oct 2023.
The group reported a net loss of RM29.7 million for the third quarter ended Mar 31, 2024.
Starbucks Malaysia still made up a big chunk of revenue for the quarter contributing about 90 per cent while the remaining came from Kenny Rogers Roaster (KRR) (7 per cent) and others. "
It said the group decided to hit pause on business expansion, amid tough business conditions, with no new stores opened in the third quarter ended Mar 31, 2024.
It currently has a total of 411 Starbucks stores. Similarly Paris Baguette store count remained stagnant at five stores.
"We opine that situation will be challenging for BFood with the unfavourable forex as 55 per cent of the beverage costs purchased from the principal Starbucks International is dominated in US dollar. Additionally, we opine that sales will take time normalise considering the still intense Israel-Gaza conflict that is unfortunately seeing no signs of abating," HLIB research said.
It has cut its financial year 2024 (FY24) forecast to losses of -RM81.2 million and FY25/26 forecast by -58 per cent/-53 per cent respectively to account for the deviations.
It also cut the company's target price 30 sen (from RM0.38) based on 16 times price-to-earnings multiple.
HLIB research reiterated its "Sell" call on the stock.
It said despite strong brand equity and active promotions, foreign exchange pressure is expected to dampen margins moving forward, while the boycott will continue to drag earnings.