BFood likely to face challenging operating landscape

PETALING JAYA: Berjaya Food Bhd’s (BFood) operating environment will continue to remain challenging.

This is due to a subdued operating environment and cost pressures from the sales and service tax (SST) expansion, which is estimated to have an annual impact of RM4mil to RM5mil, said CIMB Securities.

For the fourth quarter of financial year 2025 (4Q25), the group reported a core net loss of RM24mil.

This came after adjusting for one-off items of RM162mil (impairments for property, plant and equipment; right-of-use assets; and goodwill).

CIMB Securities said this brings the 4Q25 core net loss to RM125mil, which was lower than its and consensus FY25 estimates.

This was due to lower-than-expected operating costs from store consolidation and less-aggressive promotional campaigns in 4Q25.

No dividends were declared, as expected.

It noted that the company’s weaker 4Q25 revenue of RM115.9mil was because of a decrease in the number of operating stores as BFood shuttered 44 stores owing to the prolonged impact of boycotts.

“Furthermore, subdued consumer sentiment continued to dampen sales volumes, adding further pressure to earnings,” the research house said.

The research firm expects the first half of 2026 (1H26) to be challenging for BFood, due to the 8% SST on leasing services effective July 1, 2025.

“Given BFood’s significant exposure to retail mall outlets, we gather that the expansion of the scope of the SST could result in an annual earnings drag of RM4mil to RM5mil.

“Nonetheless, the easing of boycott-related pressures could support gradual revenue recovery.

“Additionally, BFood’s ongoing efforts to streamline its stores through the closure of underperforming outlets should help contain losses,” the research house said.

CIMB Securities maintained its earnings projections for FY26 to FY27.

It kept its “reduce” call on BFood with a lower target price of 20 sen (from 28 sen).

“In our view, BFood’s current valuation, at 3.4 times 2027 price-to-book value ratio, has yet to account for our expectations of continued, albeit narrowing, losses through the next three years (FY26 to FY28), coupled with a challenging operating landscape.

“Upside risks are faster-than-expected recovery in footfall and ticket size, along with stronger-than-expected margin from higher sales,” the research house said.

Similarly, Hong Leong Investment Bank (HLIB) Research expects “brand overhang from geopolitical headwinds to remain a drag on performance in the near term”.

That said, it noted that the group continues to streamline operations by rationalising underperforming outlets, with Starbucks’ footprint declining to 357 stores (19 net closures in 4Q25, mostly in the central region).

Kenny Rogers Roasters remained at 43 outlets, while Paris Baguette expanded to 16 stores with the addition of Desa Park City and KL East Mall (both converted from former Starbucks sites).

HLIB Research maintained its “sell” call on BFood with a lower target price of 15 sen from 21 sen.