Daiwa started Jollibee Foods at Buy with 252.00 Philippine peso target price, as the dominant market leader in the Philippines’ fast-food sector.
“We believe that the company’s robust same-store sales growth (SSSG) and store expansion plans, as well as the expected ebitda margin expansion coming from the increased franchising of restaurants, will prove beneficial to the QSR leader’s bottom line in 2018-20,” Daiwa said in a note on Tuesday.
QSR stands for quick service restaurant, while ebitda stands for earnings before interest, tax, depreciation and amortization.
Daiwa pointed to data from Euromonitor showing Jollibee has a footprint of 2,181 restaurants in the Philippines, with a 56.5 percent share of the local fast-food chain market by revenue as of the end of 2017, and a store net work of 3,516 restaurants globally.
“The company is undoubtedly a dominant QSR leader and one of the largest consumer food-service operators in the Asia-Pacific region in
terms of both revenue and restaurant count,” Daiwa said.
It forecast Jollibee’s system-wide sales to expand at compound annual growth rate (CAGR) of 14.5 percent over 2018-20, with a strong store expansion of 7.6 percent CAGR, excluding the consolidation of Smash Burger. The Philippines’ fast-food industry as a whole is estimated to expand at an 8.3 percent CAGR over 2018-20, Daiwa said.
Daiwa also said it expected the Philippines’ Tax Reform for Acceleration and Inclusion (TRAIN) Law, enacted at the beginning of 2018, and
the Senate elections in 2019, will boost Filipinos’ disposable income and give a fillip to Jollibee’s same-store sales growth.
TRAIN lowered the personal income taxes of 99 percent of the Philippine population, while higher candidate spending on advertising and promotion campaigns often “spills over to the wallets” of both lower- and middle-class consumers, Daiwa said.