Investors lukewarm on Jollibee Foods after FTSE rebalancing

Jollibee Foods Corp. (JFC) was one of the actively traded stocks last week after the rebalancing of a global index  while market players look for clues for the pandemic-battered company’s recovery.

A total of 8.14 million JFC shares worth P1.08 billion were traded from Sept. 14 to 18, data from the Philippine Stock Exchange showed, making it the eighth most actively traded issue last week.

Shares in JFC finished the week at P130.20 apiece, four percent lower from a week ago. Since the start of the year, they have tumbled 40%.

“Investor sentiment for JFC over the past months had been adversely impacted by the pandemic’s effect on the business,” China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an email interview.

“JFC saw higher trading volumes through the tail end of this week, likely driven by fund flows relating to the FTSE rebalancing,” he added.

In its semi-annual review on Sept. 10, FTSE Global Equity Index Series — Asia Pacific ex-Japan ex-China Regional Index announced changes in the index, which include JFC being moved to the mid-cap index from large cap effective at the end of business day of Sept. 18.

Meanwhile, JFC unveiled on Wednesday the opening of its third Jollibee restaurant in Europe as well as its 45th store in North America.

JFC President and Chief Executive Officer Ernesto Tanmantiong said in a statement that the company continues to grow both in North America and Europe.

He also said the Jollibee brand is seeing double-digit growth in North America with the Chowking and Red Ribbon brands also performing well. The company’s expansion plans in Europe continues, he said.

Before the year ends, the homegrown brand plans to open more stores in California and Canada. After its Liverpool launch, Jollibee, likewise, eyes another one in Leicester, England, putting it on track to launch 50 restaurants in Europe in three to five years.

“This provides some insight to the business’ recovery and growth prospects, which may help buoy investor sentiments moving forward,” Mr. Mercado said.

JFC’s revenues declined by a fourth to P62.76 billion during the first semester. It posted an attributable net loss of P11.96 billion, a reversal from a P2.50-billion net profit in the same period last year.

Aside from Jollibee, Chowking, and Red Ribbon, JFC also operates other quick-service restaurant brands such as Mang Inasal, Burger King, Highlands Coffee, Pho24, Yong He King, Hong Zhuang Yuan, Hard Rock Café, Dunkin’ Donuts, Smash Burger, Tim Ho Wan, Tortas Frontera, The Coffee Bean and Tea Leaf, and Panda Express.

As of end-June, it has 5,874 stores located across the globe.

Summit Securities, Inc. President Harry G. Liu said the lack of demand for Jollibee products as consumers stay home due to the pandemic, coupled with the launching of new stores, makes the company “financially hampered.”

“The way I look at it, if you are going to get into Jollibee, it can only reverse itself once everything is in place —  once the world economy is stable after the pandemic,” Mr. Liu said in a phone interview.

“Other than that, Jollibee will have to readjust their marketing efforts to the new normal so they can keep up with the financial forecast,” he said.

“Forward prospects for the company, alongside other players in the food service industry, will remain largely contingent on developments around the pandemic,” Mr. Mercado said.

Investors will look for cues in the third-quarter earnings report as this will provide a better snapshot of how the recovery in the business is shaping up, he added.

For this week, JFC’s stock price “will likely trend sideways over the short term between support and resistance,” Mr. Mercado said, placing the company’s support and resistance prices at P126 and P141, respectively.

“For now, as far as Jollibee is concerned, the best thing to do is to get into the fundamental price level where it is considered cheap to buy for the long term,” Mr. Liu said, providing support and resistance levels at P120 and P140, respectively.

By Michelle Anne P. Soliman|BusinessWorld

Source: Peso Economics