Simons Trading Research

Author: simonsg   |   Latest post: Wed, 17 Aug 2022, 10:12 AM


Koufu Group - Well-Positioned for Recovery From Further Reopening

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  • Business in Singapore is expected to improve with easing restrictions and further reopening of its borders. This comes as a higher percentage of its population is vaccinated. Visitors to malls and casinos should increase gradually, while those to heartland areas should remain resilient.
  • Koufu (SGX:VL6) is in a good position to emerge stronger against its competitors post-pandemic, given its good expansion strategy and strong balance sheet. Maintain BUY.

Expect Improvement of Business in Singapore From Further Relaxation

  • We expect business in Singapore to improve as restrictions are eased along with a higher percentage of the population getting vaccinated. Although the new rule which only allows vaccinated individuals to dine-in from 13 Oct 21 will impact demand initially, demand should improve over time as more of Singapore’s population gets fully vaccinated and people adapt to the new norm. As of 13 Oct 21, 83% of Singapore’s population has been fully vaccinated while 85% has received at least one dose.
  • While the number of daily COVID-19 cases remains high, 98% of the cases are asymptomatic or had mild symptoms over the last 28 days. In addition, we expect Koufu to benefit from the increase in tourist arrivals from the new vaccinated travel lanes (VTL) which allow travelers from more countries to visit Singapore quarantine free. Koufu’s food court in Marina Bay Sands should benefit significantly from overseas travelers.

Slower Recovery for Macau But Remains Hopeful as Pandemic Comes Under Control

  • On 16 Mar 21, Macau eased its border restrictions by Mainland China.

In a Good Position to Emerge Stronger Post-pandemic

  • Koufu is confident that net cash of S$69m as at 1H21 (about 20% of its market cap) could help it seize new opportunities.

Expect Better Recovery in Singapore as Restrictions Ease

  • The Government has announced that safe management measures will be gradually relaxed in the upcoming months as more of the population becomes fully vaccinated. Koufu expects its business operations to improve significantly once the restrictions are eased. From 10 Aug 21, Phase 2 (Heightened Alert) measures will be lifted in a calibrated manner as part of Singapore’s transition towards COVID-19 resilience, including more relaxed limits on dining-in.

Strong Cash Position

  • Koufu’s cash generation the most profitable among local peers.
  • Share price catalysts:
    • Completion of the sale of two central kitchens and special dividends.
    • Easing of travel restrictions and stronger-than-expected recovery from COVID-19 impact.
    • Further EPS accretive acquisitions.

Source: UOB Kay Hian Research - 14 Oct 2021

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