SINGAPORE (Nov 5): DBS Group Research is staying positive on Koufu Group, on the back of a flurry of new store openings which has driven earnings growth.

The brokerage is keeping its “buy” call on Koufu with a target price of 88 cents.

“We continue to like Koufu for its stable earnings, decent yield of 3.4%, decent cashflow generation, strong balance sheet, and steady store expansion plans,” says lead analyst Alfie Yeo in a Tuesday report.

Koufu on Monday announced a 52.3% jump in earnings for the 3Q19 ended September to $7.1 million, from $4.6 million in 3Q18. This came on the back of a 6.6% increase in revenue to $61.4 million, from $57.6 million a year ago.

Revenue contribution from the outlet and mall management segment increased by $1.8 million to $30.7 million in 3Q19, mainly attributable to two new food courts at 164 Kallang Way and Millenia Walk that opened during the period. In addition, the group also saw overall revenue growth from most of its food courts and coffee shops.

Meanwhile, revenue from the F&B retail business segment grew by $2.1 million to $30.7 million, mainly due to two new F&B stalls in the newly opened food courts and coffee shop and five new F&B kiosks at JEMS, Far East Square, VivoCity, White Sands and SMU, which commenced operations in 3Q19, as well as overall revenue growth from most of the food courts and coffee shops.

Pang Lim, executive chairman and CEO of Koufu, says, “We’ve made good strides in our organic expansion, increasing our network of food courts and coffee shops to 65 outlets across both segments. This is expected to increase further as we continue to prudently seek and secure new strategic locations, with a focus on hospitals, commercial malls, educational institutions and new housing estates.”

Furthermore, the group has surpassed its initial target of opening 25 tea beverage outlets (R&B Tea and Supertea) by end-2019. It has hit a new target of 29 outlets by end of this year, driven by wide market acceptance. Five new R&B Tea outlets opened this quarter and 10 new locations are slated to open progressively from 4Q19 to FY2020. The two tea brands will also be brought to Malaysia and Indonesia, with the first R&B Tea opening in Melaka in November 2019.

Two new food courts – one in Singapore and on in Macau – are also due to open in FY20.

As at 3.15pm, shares in Koufu are trading 3.3% higher at 78 cents or 4.0 times FY19 book.