BreadTalk Group had a challenging FY15, with results coming in below our expectations. Driven by growth in sales for all segments (Bakery, Food Atrium, Restaurant), revenue was up 5.9% at S$624.1m. However, PATMI declined 66% to S$7.6m, due to ~S$5.4m of impairment charges, higher staff and rental costs, as well as underperformance of stores.

Bakery division saw an underperformance of operations in Beijing, Hong Kong and Malaysia, while management continues to see operational challenges for its Food Atrium division from the slowdown in Mainland China. The group aims to focus on cost rationalization and increased productivity. Pending more information from an analyst briefing later this morning, maintain SELL, while our fair value estimate of S$1.09 is under review. A final DPS of 1.0 S-cent was declared, similar to last year.

Source: OCBC Research - 25 Feb 2016