Cafe de Coral maintains buy rating from Jeffries

Analysts from the firm expect the chain to be “one of the first segments to recover from the outbreak”.

Cafe de Coral Holdings (CDC) maintained a buy rating at Jeffries as the financial services company estimates the quick services restaurant industries in Hong Kong and China to be one of the first segments to recover from the outbreak.

For both markets, Jeffries analysts Anne Ling and Boya Zhen estimate sales in QSR have recovered to 80% of previous levels.

In Hong Kong, they believe the lifting of social distancing restrictions and recently-announced government subsidies will help accelerate recovery whilst simultaneously expecting more closures in China during the fiscal year.

Both Ling and Zhen also believe the chain is “likely” to draw down most of the HK$1.2 billion bank facilities “soon”, allowing it to support capital expenditures of around HK$400 million a year for the next two years.

“Once the company has achieved a more meaningful net profit, we expect it will return to its generous dividend policy with (an) ordinary dividend at 60-70% and a special dividend should it have excess cash,” they said in their report.

In an exchange filing, profit for the operator fell 87% to HK$73.6 million (US$9.6 million) for the 12 months ending 31 March, from HK$570 million a year earlier.