Profitability concerns weigh on Jollibee stock price

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Jollibee Guam
The first Jollibee restaurant in Guam opened on April 6. -- JOLLIBEE FOOD CORP.

INVESTOR concerns on Jollibee Food Corp.’s profitability for the first half of the year made the company’s stock one of the most actively traded last week.

Data from the Philippine Stock Exchange showed that Jollibee was the fifth most actively traded stock with a total of 3.291 million shares worth P1.045 billion having exchanged hands on the trading floor from April 8-12.

Jollibee shares closed at P310 apiece on Friday, down 2.27% from the previous day and 3.13% on a week-on-week basis. For the year, however, the company’s shares are up 5.8%.

“Factors that have driven market players to trade [Jollibee shares] are the release of its earnings, as well as the cash dividend to be given to investors,” said Diversified Securities, Inc. equities trader Aniceto K. Pangan in a text message.

Andy dela Cruz, senior research analyst at COL Financial Group, Inc., attributed the stock movement to the release of the company’s earnings report late last week.

“Jollibee issued a press release [on Thursday] indicating that it may see weaker sales and profits in the first half of 2019,” he said in an e-mail interview.

“[W]e already expected the weaker sales for Jollibee in the early parts of 2019 since it has alluded to this way back then. The only reason for weaker year-on-year performance for early 2019 was that it increased prices significantly in early 2018,” Mr. Dela Cruz said even as he noted a possible recovery as early as the second quarter given the growth in “consumer spending as a result of slowing inflation and boost from election spending.”

Last Thursday’s disclosure included a statement from Jollibee’s Chief Financial Officer Ysmael V. Baysa who said that the company “performed strongly” despite the rising inflation and slowing economic growth last year. At the same time, Mr. Baysa stated that Jollibee’s financial performance this year “will be mixed” with sales and profit performance in the first two quarters expected to “not be as strong” as in previous years while hoping for recovery in the second half as consumers “regain their purchasing power” following last year’s elevated inflation environment.

“Short term, there are some headwinds since we think spillover from last year’s peaking inflation could still affect consumer sentiment at least in the first quarter of 2019,” COL Financial’s Mr. Dela Cruz said.

“Still, long-term growth story of Jollibee remains rosy. We believe in its ability to grow and expand its brand not only locally, but globally as well.”

Diversified Securities’ Mr. Pangan said Jollibee stock is due for correction as it is overvalued. “While in the long term, the company will continue to grow after the full acquisition of Smashburger and continued buildup of new stores,” he said.

Mr. Pangan sees Jollibee’s price support at P300 and resistance at P330 in the coming weeks.

Cristopher Adrian T. San Pedro, technical analyst at Unicapital Securities, Inc., placed the stock’s support and resistance levels at P305.8 and P328.4, respectively.

Jollibee booked a net income attributable to the parent of P8.33 billion in 2018, 17.2% higher than the P7.11 billion it generated the year before.

The company allocated P17.2 billion in capital expenditures this year, almost double its actual spending of P9.6 billion in 2018, in order to support its aggressive store expansion both locally and overseas.

Last year, it entered four new markets, namely Italy, Macau, the United Kingdom, and Malaysia.

By end-2018, Jollibee had a total of 4,521 stores across several brands that include Chowking, Greenwich, Red Ribbon, Mang Inasal, Burger King, Pho 24, Yonghe King, Hong Zhuang Yuan, and Highlands Coffee, among others. Its latest acquisitions include American burger chain Smashburger, which was fully purchased by the group last December. It has also invested in Mexican restaurant chain Tortas Frontera LLC founded by chef Rick Bayless.

Earlier this month, the company opened its first store in Guam, its 38th store in the US. The company targets to have 8,000 stores by 2022 coming from both organic growth and acquisitions. — Marissa Mae M. Ramos