SINGAPORE (April 9): UOB Kay Hian is maintaining its “buy” call on Koufu Group with an unchanged target price of 95 cents while highlighting Koufu as a potential beneficiary from the upcoming expansion of Marina Bay Sands (MBS), where the group operates an existing food court.

See: This F&B empire is a steal at current valuations, says UOB Kay Hian

To recap, Las Vegas Sands Corporation (LVS) has committed some US$3.3 billion ($4.5 billion) to expand MBS by adding a thousand-suite hotel tower, a 15,000-seat entertainment area and additional MICE space.

This is expected to lift visitor volumes and spending, and at the same time, has extended MBS’ exclusive rights to run a casino in Singapore until end-2030.

In a Tuesday report, analyst Yeo Hai Wei says he expects Koufu’s Rasapura Masters food court at MBS to be a major beneficiary from the latest expansion deal given its relatively-affordable price points and unique positioning of housing famous hawker fare, in his view.

LVS’s commitment to refreshing the Singapore IR should strengthen MBS’s positioning as an iconic tourist destination, he adds, even as competing properties within the region emerge.

“After completion, the expanded property is expected to drive additional visitations to MBS as well as enlarge the MBS workforce. This bodes well for lessees within The Shoppes as the additional footfall will translate into increased spending,” says Yeo.

Looking ahead, the analyst says he is also not ruling out the possibility of Koufu opening another outlet at the enlarged MBS, where there is likely to be new units for tender post the expansion.

The way Yeo sees it, a potential new outlet would likely to operate under a brand other than Rasapura, with lower price points to accommodate demand from an enlarged workforce.

“Koufu’s valuation has not yet matched its growth outlook. Going forward, we see potential price upside, especially in 2019 as the positive impact from the enhancement initiatives for Rasapura, new outlet openings and the steady roll-out of R&B Tea begins to emerge,” he says.

As at 11am, shares in Koufu are trading flat at 82 cents or 4.53 times FY19F book value.