Neo Group: RHB initiated coverage with a Buy and TP of $1.20 on the counter today, citing its consistent growth outperformance over peers. House believes the outperformance will continue, led by its growing dominance in the food catering market and the improved performance of its new acquisition.
The group launched a new central kitchen in Oct 2014, which is expected to double its catering capacity upon ramping up. With added facilities to capture the burgeoning demand for food catering services, RHB expects the revenue CAGR from this segment to be
at 24% over FY15-18F (Mar). House also expects an improvement in its overall EBIT margin to 11.3% by FY18F, up from 9.7% in FY16F and led by increased economies of scale.
Over the years, the company has diversified into F&B retailing and food manufacturing on top of its food catering business. With these budding segments, RHB expects to see improved profitability from:
i) growing Umisushi delivery sales through the leverage of its existing logistics network, and
ii) the turnaround of its newly-acquired stake in food manufacturing business, Thong Siek Holdings
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