BreadTalk Group has signed a franchise agreement with Myanmar Bakery Co., Ltd, a member of the Shwe Taung Group, to establish the BreadTalk bakery chain in Myanmar. The partnership allows BreadTalk to leverage on the Myanmar conglomerate Shwe Taung Group’s network and real estate footprint in Myanmar, which includes the Junction Centre group of shopping centres.

The first BreadTalk outlet is slated to open in Yangon by early 2017 in one of Shwe Taung Group’s shopping centres. Due to the group’s expansion plans, we have been seeing some usual drags on earnings from gestation and depreciation.

We believe management will continue to look out for and collaborate with quality franchisees, especially as this allows the expansion of their presence without incurring heavy upfront costs. Post FY15 results, we kept our SELL rating on the stock with fair value estimate of S$0.96 as we prefer to see a steadier state of growth across all segments. Note that 1Q16 results will be released on or around 9 May.

Source: OCBC Research - 4 May 2016