INVESTORS pounced on the Jollibee Foods Corp. stock last week as they took advantage of its attractive valuation following weeks of sell-offs.

Jollibee was the fifth-most traded stock during the three-day trading week from April 6 to 8, with P837.86-million worth of 7.53 million shares exchanging hands at the Philippine Stock Exchange during the period.

Jollibee shares closed at P120 apiece on Wednesday, up 17.6% from its closing price of P102 each on April 3. Its stock price lost 43.7% since the start of the year.

“Prior to the start of [last] week, Jollibee was the second worst-performing stock in the index with a year-to-date share price performance of -52.8%. Thus, [last week’s] gain was mainly driven by investors who bought the stock on the assumption that the worst-case impact of COVID-19 (coronavirus disease 2019) on the company’s business is largely priced in,” said Philippine National Bank (PNB) Vice-President and Head of Equity Research Division Alvin Joseph A. Arogo in an e-mail.

In a separate e-mail, Philstocks Financial, Inc. Research Associate Claire T. Alviar attributed the stock’s gain on several factors, namely: the news on the slower domestic inflation rate, the developments on Jollibee’s operations, the declaration of cash dividends, and the “technical rebound” following the stock’s huge sell-off in previous sessions.

“Jollibee is at bargain level in terms of Price-to-Book Value (currently at 2.45 times), [which is] much lower than the five-year average range of 6.4 times to 7.1 times… Its price-to-earnings ratio (trading below 20 times earnings), is cheaper compared with the five-year average of around 39 times earnings. Investors are cautiously picking at bargain level, but risks remain given that same-store sales growth might decline in the Philippines and in abroad as well…,” she said.

In a statement last Tuesday, Jollibee Founder and Chairman Tony Tan Caktiong said that while the pandemic has caused “unprecedented disruption” in the company’s operations, they are “already planning” for the full restoration of operations.

The company expects growth to “resume even if gradually” through its delivery, take-out and drive-thru business channels.

In the same statement, however, the global fast-food operator said it was reducing its capital expenditure allocation for the year by 64% to P5 billion from the previously announced P14 billion due to the operational adjustments brought by COVID-19. Operating costs are also being reduced “significantly” for its stores, commissaries, support services and main offices all over the world.

Moreover, the company also declared a cash dividend of P0.62 per share of common stock, of which dividends will be paid on May 22 to stockholders on record as of April 27.

“From dine-in and serving cooked meals to mostly take-out and offering ready-to-cook meals, we can see how the company shifted its strategy to reduce damages of COVID-19 on its earnings… Some investors are also buying up the stock to be entitled to dividends,” Ms. Alviar said.

On the other hand, PNB’s Mr. Arogo, said this shift towards take-out and delivery would, at best, “only minimize” the disruptive impact of COVID-19 on its financial performance this year.

“We believe quick-service restaurants like Jollibee would operate in a more challenging environment both during and after a virus-driven lockdown. This is because even if the restaurant dine-in resumes, overall consumer confidence, especially for discretionary spending, would likely remain weak due to the economic downturn. There is also a higher chance that the turnaround in the company’s recent international acquisitions could take longer,” he said.

“[W]e expect the higher than normal share price volatility to continue because of uncertainties regarding the economic impact of COVID-19,” he added.

Jollibee has 5,981 stores across the globe as of end-February: 3,317 in the Philippines and 2,664 abroad.

The company previously announced operational limitations both locally and abroad due to government-imposed lockdowns in select regions in light of COVID-19.

In the Philippines, the delivery business has grown 5% in the early part of 2020 from 3% in the early part of 2019. But as several stores have closed due to the Luzon lockdown, those that remained open for drive-thru and take-out orders have risen at an average of 50% same store sales growth in the early part of the year.

For Philstocks’ Ms. Alviar: “[G]ood management will help the company to sustain growth in the coming years so some investors are already accumulating at bargain levels.”

“But for now, the COVID-19 pandemic impact, together with the possible losses from Smashburger and CBTL, could still hit Jollibee’s earnings this year, and the stock price might continue to be volatile,” Philstocks’ Ms. Alviar said.

Jollibee’s attributable earnings stood at P6.33 billion in 2019, 14.4% lower from a year ago due to a 25% contraction in operating income to P5.87 billion.

Ms. Alviar placed Jollibee’s stock first and second support levels at P100 and P88, respectively. Meanwhile, first and second resistance levels are pegged at P120 and P140, respectively.

“Technical-wise, it has to break the P120 resistance with strong volume before it continues to rally, and failing to do so, will pull the stock to its support of P100.00. We expect sideways movement with downside bias next week, after its recent rallies,” she said.

The fast-food chain controls brands such as Jollibee, Chowking, Greenwich, Red Ribbon, Mang Inasal, Burger King, PHO24, Yonghe King, Hong Zhuang Yuan, Dunkin’ Donuts, Highlands Coffee, Hard Rock Cafe, Smashburger, and Coffee Bean and Tea Leaf (CBTL). — L.O. Pilar