JFC shares down despite taking full ownership of Tim Ho Wan

JOLLIBEE Foods Corp. (JFC) shares fell last week after announcing a S$20.2-million (P892.29 million) transaction to gain full ownership and control of Hong Kong-based dim sum restaurant Tim Ho Wan.

Data from the Philippine Stock Exchange showed 1.35 million shares worth P357.5 million switched hands from Nov. 4-8, making it the 17^th most actively traded stock in the local bourse last week.

Shares in the company finished trading at P260 apiece on Friday. The stock price fell by 2% from a week earlier, when it closed at P265.20 on Oct. 31.

The stock still maintains an upward trend for the year, growing by 3.4% since its P251.40 close on Dec. 29, 2023.

Luis A. Limlingan, head of Sales at Regina Capital Development Corp., said that news pertaining to Jollibee’s acquisition of Tim Ho Wan primarily affected the stock’s volatility for the week.

The restaurant company announced in a press release to the exchange last Tuesday that it plans to transfer full ownership and management of Tim Ho Wan Holdings Pte.

Ltd., the holding company of the restaurant, to Jollibee Worldwide Pte. Ltd. (JWPL), a subsidiary of JFC.

Tim Ho Wan, a global restaurant chain with around 80 locations across 11 countries, will become the flagship brand for the Jollibee group’s Chinese cuisine segment following the acquisition.

JWPL has held a 92% participating interest in Titan Dining LP, the original proprietor of Tim Ho Wan, since January 2024, raising its total maximum fund for Titan to P18.9 million.

“At least for the week’s trading activity and price movement of JFC, the news of JFC’s acquisition of Tim Ho Wan immediately reflected market’s positive sentiment, with JFC’s stock price surging by +4.09%, closing at P275/share on the day the announcement was made,” Mr. Limlingan said in a Viber message.

“The company has experienced rapid expansion in both domestic and foreign markets, particularly in the Middle East and North America,” said Alfonso G. Teodoro, equity research analyst at Timson Securities, Inc., in a separate Viber message.

“Recent purchases by Jollibee, including a stake in Compose Coffee in South Korea and complete ownership of Tim Ho Wan in Hong Kong, also contributed to the company’s active trading status,” Mr. Teodoro added.

In July, JFC bought 70% of Compose Coffee Co., Ltd. and its roasting facility JMCF Co. Ltd. for P20 billion. Private equity firm Elevation Equity Partners Korea Ltd. kept a 25% stake while Titan Dining II LP (Titan Fund II) owned 5%.

In April, JWPL announced its participation and capital call commitment to Titan Fund II. The fund is planned to acquire and grow food and beverage concepts, with the goal of expanding Asia-Pacific food service brands and bringing global brands to the region. 

“Through strategic acquisitions, robust domestic performance, and strong foreign expansion, JFC is well-positioned to maintain its growth trajectory in 2024,” said Mr. Teodoro.

Mr. Limlingan said that Jollibee is expected to maintain its growth momentum in the third quarter of 2024, building on over a 10% increase in revenue and net income during the first half of the year. This growth is anticipated to be driven by strong same-store sales as well as the company’s expansion efforts.

“However, with recent news pertaining to the US election, higher inflation, and lower GDP (gross domestic product), revisions might be considered for FY2024,” Mr. Limlingan added.

The Philippine economy’s expansion slowed to 5.2% in the third quarter as bad weather and lower government spending held growth back, according to the Philippine Statistics Authority.

“Key risk factors that may have an impact on earnings and revenues for JFC may include supply chain disruptions, rising commodity costs, and the potential for lower consumer spending due to economic slowdowns in some regions,” said Mr. Teodoro.

“Despite ongoing economic difficulties, the company should be able to achieve good revenue growth for the year because of its diverse brand portfolio and efficient operations.”

For the second quarter, Jollibee’s attributable net income grew by 30.8% to P3.04 billion.

Meanwhile, consolidated revenues increased by 10.6% to P67.22 billion.

For the first half of the year, net income grew by 28.9% to reach P5.66 billion, while consolidated revenues grew by 10.9% to P128.52 billion.

“Price has still respected the P273 resistance level the past few weeks and recently closed below the short-term support of P264 per share. As investors await the next earnings result for JFC on Nov. 13, price may still find support at around 250 to 254 per share, having a pullback at the 100-day EMA (exponential moving average),” said Mr. Teodoro.

Mr. Limlingan pegged support and resistance for the stock at P260 and P275, respectively. — Pierce Oel A. Montalvo