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What to expect of Café De Coral's financial results

Uninspiring results loom, warns Maybank Kim Eng.

According to Maybank Kim Eng, Café De Coral and Fairwood are scheduled to report their 1HFY3/13 results today and tomorrow, respectively. Overall, our pre-blackout communication with CDC’s management suggests an uninspiring results. 

Here's more from Maybank Kim Eng:

To recap, key highlights are i) SSSG to be in the mid-single-digit range in HK and flat in China, given that operations in both markets were purely price-driven;

ii) SSSG of specialty stores, in particular Spaghetti House, was flat, weighed down by weak consumer sentiment and a higher base;

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iii) HK sales expected to yield highsingle-digit YoY growth. Management believes it can grow the segment’s bottom line in tandem with the topline, as the moderation in food costs, albeit on a base effect, will help mitigate labour cost pressure; food costs, however, are expected to rise HoH in 2HFY3/13E;

iv) as for its China operation, management was satisfied with the cost control measures for its stores but admitted that the addition of new stores would dilute near-term earnings.

To recap, CdC targets to add 30 new stores in FY3/13E and achieve a store count of 200 by end-FY3/14E. It already has around 120 stores as at end-FY3/12. Analyst briefing will be held at 330pm HKT tomorrow.

Overall, the operations in HK are in-line with our past communication with managment while profitability could take a hit in China where CdC has yet to reach critical mass. The counter is trading at 24.2/22.7X consensus FYMar13/14F PER, with a projected yield of 3.0%/3.4%, respectively.

We currently do not cover the name. Street is looking for 7% YoY net profit growth on the back of 13% YoY sales growth in 1HFY3/13.  

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