Jollibee Foods Corp. Review



I miss Jollibee Spaghetti!
Jollibee Foods Corporation or JFC is company whose principal business is the development, operation and franchising of fastfood restaurants in the Philippines and abroad. It was incorporated in Jan, 1978 and has expanded widely since then.

Business Details:
1. Jollibee - the flagship business, is the fastfood chain that  served burger, fries and other trademark products. By the end of 2010, there are 717 Jollibee stores nationwide and 67 stores overseas.
2. Chowking- Chinese fast food chain. As of Dec, 2010, Chowking had 400 domestic stores and 38 international stores.

3. Greenwhich - pizza parlor chain. As of Dec 2010, Greenwhich had 223 stores nationwide.
4. Red Ribbon - pastries and bakeshop. As of Dec 2010, there are 125 branch nationwide.
5. Mang Inasal- newly acquired since Nov 2010 is a fastfood whose main product is grilled chicken and Filipino food. Mang Inasala had 345 stores by end of 2010.
6. Cafe Ti-Amo - coffee and gelato brand originated in Korea. It has 3 stores now.
7. Yonghe King -  fastfood chinese restaurant based in China. As of December 2010, it has 200 stores spread over 21 key cities in China.
8. Hongzhuangyuan - another chain of restaurants in China. It has a total of 52 stores as of 2010.
9. Freemont Foods Corp - a subsidiary which owns and operates the company's Jollibee stores in the Visayas and Mindanao areas.
10. Grandworth Resources Corp - a real estate company which owns or leases some of the properties used as store sites.

Business Perfomance:
The Jollibee Foods Corporation posted an increase in revenue of 11.3% compared to previous years. All brands in all countries contributed to the growth particularly led by those attributed by Yonghe King and Hong Zhuang Yuan in China.
(click to zoom)

The consolidated net income for the year 2010 jump at a 20.5% increase versus the previous year.

However because of the fast rising cost of raw materials and overhead expenses, the 1Q2011 decline by 8.8% from P691.3M to P630.6M.

Note: For reference about ratio and stocks analysis, read here.

Profitability:
ROE = 19.15%
Average ROE for 5 years = 18.88%
OCF/Equity = 31.89%
Net Profit Margin = 6.02

Growth:
Annual Net Income Growth Rate (5 yrs) = 10.35%

Debt and Risk:
DE Ratio = 24.74%
Current Ratio = 0.99

Though leverage level is healthy, the liquidity level has to be improved since the current ration is below 1.5 which is the considered good level of current ratio.

Dividend:
Dividend Yield (2010) = 2.53%

Recently, JFC distributed dividend at P0.50 per share or a dividend yield of 0.56% based on closing price of P88.5 last May 27, 2011.

Other factors:
It was reported in the news (read here) that JFC increases its interest in US restaurant operator Chow Fun Holdings LLC which is the developer and owner of Jinja Bar and Bistro (a resto chain serving Asian cuisine).  This will contribute to growth in the company in the future.

Valuation:
PE Ratio = 28.73
PB Ratio = 5.35
Intrinsic Value = P101.5/share
Current Price = P88.5/share
Upside = 14.74%


Recommendation:
JFC is a very profitable company and it is expected to continuously do so. However, current stock price is already expensive and with the looming inflation rate hike, it is recommended to wait and buy JFC stocks at a margin when level becomes favorable.

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