Reopening Disrupted by Omicron But No U-turn

• F&B establishments, including food courts and hawker centres, are now allowed to admit five vaccinated persons from different households for dining in at the same table. However, Omicron throws a spanner in the works and there are concerns the government may be forced to re-introduce safety measures to tackle the new variant.
• We do not foresee a U-turn on the direction of re-opening plans, which are supportive of medium-term recovery in footfall and operating leverage.

Footfall May be Affected in the Near Term

• Not surprisingly, the dining-in cap has somewhat impacted footfall to Koufu (SGX:VL6)’s F&B outlets in 3Q21. Koufu’s total revenue on a same stores basis (excluding new outlets) fell by 20% from 1 Jul to end-Oct 2021 as compared to pre-COVID levels in 2019. This implies flattish y-o-y growth during such period or over +10% year-to-date.
• Nonetheless, management has guided for certain impairment losses on trade receivables, property, plant and equipment, as well as right-of-use-assets on non-performing outlets to be recognised in FY21.

On Expansion Path Despite Tough Environment

• In terms of outlet expansion, Koufu is set to open a new coffee shop at Blk 467 Bukit Batok Ave 9 and two food courts at Hougang River Court and Novena Square in 1H22.
• Meanwhile, it has already secured 1 new Dough Culture kiosk at White Sands and two Grove QSRs at Northshore Plaza and Buangkok Square, opening in 4Q21 and three new Dough Culture kiosks at Jurong East MRT, East Point Mall and Sengkang Grand Mall to be opened progressively in 2022.

Dim Sum, Dough & Bakery Production at New Facility

• The dim sum, dough and bakery production plants will start operating from its new integrated facility based on 18x FY22E P/E.

Source: Maybank Kim Eng Research - 30 Nov 2021