Indonesia franchise boosts Delifrance earning prospects
Indonesia franchise boosts Delifrance earning prospects
SINGAPORE (Reuter): Delifrance Asia Ltd's expansion of its French-style cafes to Indonesia prompted analysts yesterday to revise upwards the company's earnings prospects.
"The impact is definitely going to be positive. At least in the next two to three years, we will see Delifrance realizing franchising fees," Soc-Gen Crosby analyst Michael Ong told Reuters.
On Wednesday, Delifrance said it had agreed on a master franchise and joint venture with Indonesian partner PT Citra Bonang, the family holding of Indonesian businessman Kris Wiluan.
Wiluan is also the president director of Indonesian steel giant PT Citra Tubindo, which supplies oil and gas pipeline products.
Under the agreement, PT Citra Bonang will have the exclusive rights to operate Delifrance outlets in Indonesia. As partner in a 50:50 joint venture company, to be named PT Delifrance Nusantara, it will also make and sell Delifrance bakery products in the country.
Delifrance, which has 144 outlets in Singapore, Malaysia, Hong Kong, Australia, China and the Philippines, said it was targeting to open 120 Delifrance outlets in Indonesia by 2006.
Analysts said Delifrance stood to reap up to Singapore $1.5 million in franchising fees alone immediately with the opening of about 30 outlets within the first year.
The Indonesian contribution is expected to be reflected in the group's 1998 earnings.
For the financial year ended June 30, 1997, Delifrance's net profit was forecast by analysts in the Edinburgh Publishing Estimate Directory at S$8.8 million, up 29 percent over the previous year.
Analysts said they expect the company to see even higher growth rates for 1998 because of the Indonesian deal.
"Prospects for Delifrance are very good. But it is a long-term buy...(I)n terms of price earnings it is not cheap. A lot of the expectations have been factored in the share price," said Nora Cheng, investment analyst at HSBC James Capel Securities.
Delifrance stood at S$1.88 at midday Thursday after hitting a high of S$1.90. Volume was active with over 1.3 million shares traded.