SINGAPORE (Feb 14): DBS Group Research is keeping its “buy” recommendation on food court operator Koufu, with a reduced target price of 84 cents from 88 cents previously.

In a Thursday report, lead analyst Alfie Yeo says, “We have reduced our earnings forecasts in view of lower footfall from casino operators undergoing a 15-day suspension of gaming operations in Macau. We believe Koufu will be affected marginally with close to 10% of its revenue coming from Macau.”

On Feb 4, Macau directed all casino operators to suspend operations for two weeks until Feb 20 to help curb the spread of the coronavirus. Macau’s chief executive, Ho Iat-seng, also warmed that the closures may extend if the virus continued to spread.

Over this two-week closure period, DBS expects Macau to lose about 1.5 million visitors.

Koufu currently has two foodcourts in Macau – Sands Cotai Central and University of Macau – and four stalls, along with one tea kiosk in the University of Macau. Overall, the group’s business in Macau contributes about 10% of its total revenue. The group’s remaining revenue is from its 49 foodcourts and 23 kiosks in Singapore.

“As mentioned above, we see a loss of revenue and profit in Macau due to reduced footfall and lower rental income. The impact is not expected to be big for Koufu, with Macau’s contribution estimated at only 10% of annual sales,” says Yeo.

“Koufu’s overall earnings remain largely dependent on its Singapore operations, with Marina Bay Sands foodcourt outlet a key contributor,” adds Yeo.

Nonetheless, the analyst continues to like this stock for its earnings resilience, strong balance sheet, and dividend yield of 3.4%, excluding special dividends.

As at 11.25am, shares in Koufu are trading at 74 cents or 3.4 times FY20 book.