SINGAPORE (July 4): Koufu Group, the operator of 50 or so food courts and coffeeshops, was the most profitable listed F&B play in FY18 with net profit of $24.5 million.

This was bigger than rival Kimly Group, Breadtalk Group and Jumbo Group which recorded net profit of $21.9 million, $15.2 million and Jumbo Group’s $11 million respectively.

Now, investors can expect Koufu to perform even better in FY19 based on the growing popularity of food courts, full-year contribution from its Rasapura food court at Marina Bay Sands as well as the opening of new outlets, says UOB KayHian in a new report.

Firstly, Singaporeans are switching to “other eating places’’ -- which includes food courts and hawker centres but excludes restaurants, fast food outlets and caterers -- amid the weaker economic backdrop.

In 4Q18, the segment grew of 3-4% y-o-y compared with 0% growth in 1Q18-3Q18, as suggested by Singstats data.

Secondly, Rasapura, Koufu’s largest contributing food court in terms of revenue, has reopened after being partially closed for refurbishment in 2Q-3Q18, lifting Koufu’s same-store sales growth.

Thirdly, Koufu has opened three new food courts in Singapore and one in Macau.

Lastly, its R&B Tea and Elemen outlets are expected to be on track to contribute a total of some $2 million in FY19 earnings.

“We believe the market has still yet to fully realise Koufu’s strong cash flow generation ability which has helped it build a significant cash hoard of $98.7 million as of 1Q19, equivalent to 25% of its market cap. In addition, the market has also not fully appreciated Koufu as the most-profitable listed F&B company,” says UOB lead analyst Joohijit Kaur.

UOB is maintaining its “buy” call on Koufu, with a target price of 95 cents or 16.7 times FY20F earnings.

As at 10.39am, shares at Koufu are up 0.5 cent at $74.5 cents .