DBS is keeping its “buy” recommendation on food court operator Koufu with an unchanged target price of 77 cents, despite the group reporting less than stellar FY2020 results.

In its final year ended December 2020, Koufu posted revenue of $192.4 million down 19% from the preceding year, as circuit breaker measures earlier in the year hurt overall sales. However, coupled with writedowns and other one-off items, the company’s earnings dropped by 64.3% y-o-y to $9.9 million.

Pang Lim, Koufu’s executive chairman and CEO  believes that despite the woes this past year, the company is better positioned to capture growth ahead. “We have emerged stronger as a business by working with strategic and complementary partners to reinforce our business and revenue streams,” says Pang.

See: Koufu Group reports 64.3% drop in FY2020 earnings


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Analyst Alfie Yeo too sees a stronger outlook for Koufu. In a Feb 24 report, he says, “We see Koufu’s earnings benefiting from higher footfall as domestic consumption continues its rebound in Phase 3 and beyond.”

Although Koufu’s performance is still some way off pre-Covid-19 levels, Yeo expects earnings to improve as domestic consumption gradually picks up.

Yeo expects earnings to continue improving and the group to expect a “strong recovery” post Covid-19. There is also a potential for the stock to declare special dividends from the sale of its existing central kitchen property. This could also cause the share price to drive higher.

“We anticipate recovery to pre-Covid-19 levels by end of this year,” says Yeo.

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Additionally, the stock is trading attractively at 14.7 times FY2021 P/E and 14.4 times FY2021 P/E, or -0.5 standard deviation of its mean. The stock is trading below its peer average of 18 times and also offers a prospective yield of 3.4%.

“Our forecasts are above consensus for FY2021 as we factor in Jobs Support Scheme extension and new outlets. FY2022 earnings imply a less aggressive recovery due to a more conservative estimate on a front-loaded recovery in FY2021,” says Yeo.

As at 12.00pm, shares in Koufu are trading at 66 cents or 3.3 times FY2021 book with a dividend yield of 3.4%.