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QuestionsCategory: Business QuadrantBerjaya Food has been slammed by losses from its Kenny Rogers Roasters (KRR) business segments, what are your views?
Thomas asked 6 years ago

Hi Victor/Rusmin/Any IQ members,
I have been following this company news for quite some time and recently, its quarterly report show that its KRR have been loss making. its share price today dropped 4 cents to RM2/share which I think still overvalued.
From my point of view is that, while its Starbucks biz segment is resilient, its KRR and Jollibeans are facing some hiccups. This dragged down its profits and further dragged down by its debt used to acquire the additional 50% of Starbucks biz. My big question is, why they still expand KRR and Jollibean?
What are your views on this? :)

1 Answers
Rusmin Ang answered 6 years ago

Hi Brian,
 
I think this question is best directed to the management but I will still share with you my personal opinions.
 
For Berjaya Food, you’re right that Starbucks is probably the crown jewel of the company and actually the history of the company started with Kenny Rogers then management went on to acquire Starbucks and Jollibean Singapore. On the hindsight, the management has made a good move to acquire Starbucks but not Jollibean Singapore. Honestly, it is difficult to get 100% right on all the new ventures and I believe Jollibean was acquired primarily because the management sees the start-up cost of Jollibean is small and therefore, it can be easily duplicated in other countries. 
 
My personal view is that, if these two divisions continue to eat into the overall profit margin, I foresee the share price will feel a lot of pressures and thus, opportunity will arise. The management may get a lot of pressure from the shareholders to re consider these two divisions if they are proven not viable anymore.