BreadTalk Group released its 2Q16 results yesterday evening. Revenue was down 3.3% YoY to S$149.8m while PATMI declined 55% to S$1.3m. 1H16 revenue was slightly down by 1% to S$304.3m, meeting 48% of our full year expectations, while PATMI dropped 23% to S$3.8m, forming 32% of FY16F estimates.

Recall that 1Q bottomline was helped by a divestment gain of S$8.5m. By segment, 1H EBITDA for Bakery and Restaurant improved but Food Atrium's EBITDA declined 77% to S$2.3m with a lower margin of 2.9% (vs. 11.7% in 1H15). The latter was due to headwinds faced by Mainland China operations, write-offs for outlet closures, gestation costs for new outlets and higher operating expenses.

Maintain SELL with fair value estimate of S$0.96 for now. Separately, an interim dividend of 0.5 S-cents/share was declared, similar to last year.

Source: OCBC Research - 4 Aug 2016