HLIB said in a note today that at 66 sen, BFood is trading at an undemanding 9.5 times FY2024 PER (price earnings ratio), which is lower than its five-year mean of 12 times.

The investment bank’s research arm said this valuation is reasonable given BFood’s strong Starbucks brand and expansion plans.

According to HLIB, BFood plans to open 40 to 45 new Starbucks stores in FY2024, higher than the usual 35 to 40 stores a year.

“A successful breakout above the 70 sen resistance will spur greater upside towards 75 sen-79 sen-88 sen. The cut loss is at 59 sen,” HLIB said, adding that BFood is currently building a strong base at 64 sen to 66 sen levels.

BFood’s share price fell dramatically following the group’s weaker-than-expected results in the third quarter of 2023 (Q3 FY2023), noted HLIB.

The counter dropped 30% due to knee-jerk sell-off to as low as 55 sen before subsequently rebounding to within the 64-66 sen range.

In its note today, HLIB has placed a “trading buy” rating on BFood, believing that the group’s outlook will improve in FY2024.

This is due to its projection that cost pressures will alleviate on the back of lower raw material costs and a stronger ringgit.

“Considering these factors, along with the anticipated normalisation of the Ebit (earnings before interest and tax) margin with a projected increase of 2.2 percentage points year-on-year, we are forecasting a robust rebound in BFood’s core Patami (profit after tax and minority interests) of 29.8%,” it said.

In FY2023, BFood posted a net profit of RM103.4 million, down 17% from RM124.8 million in the preceding financial year.

As at 12.08pm, BFood’s share price was up 1 sen or 1.52% at 67 sen, giving the group a market capitalisation of RM1.3 billion.