by winston » Wed Dec 10, 2008 4:43 pm
Cafe de Coral Rises in Hong Kong on 15% Profit Gain (Update1)
By Stephanie Wong
Dec. 10 (Bloomberg) -- Cafe de Coral Holdings Ltd., the biggest-listed Chinese fast-food chain, rose the most in two weeks in Hong Kong trading after saying profit rose 15 percent in its fiscal first half.
The restaurant chain’s shares gained as much as 6 percent to HK$13.98, the most since Nov. 25. The stock traded at HK$13.96 at 2:56 p.m. in Hong Kong.
“Cafe de Coral’s sales performance is better than a lot of its peers and this proves that they are recession-proof,†Fiona Wong, consumer analyst at Sun Hung Kai Securities Ltd, said over the phone from Hong Kong. “Because people aren’t sure if they could hold onto their jobs, even the middle-class prefer to eat at cheaper diners like Cafe de Coral.â€
Hong Kong restaurants boosted sales by 14 percent in the third quarter after prices rose. Cheaper restaurants have become more attractive as Hong Kong slipped into its first recession since the severe acute respiratory syndrome epidemic in 2003, said Alice Hui, associate director of research for DBS Vickers Hong Kong Ltd.
Cafe de Coral’s gain today trims this year’s loss to 27 percent, compared with a 45 percent drop for the benchmark Hang Seng Index.
The company said yesterday profit in the six months ended September rose HK$200.6 million ($26 million) from HK$175 million, after sales were boosted by the opening of 19 restaurants in Hong Kong during the period.
Expansion Opportunities
While it will adopt a “more conservative†investment strategy because of the financial crisis, Cafe de Coral said it will continue to seek opportunities to expand.
“A lot of the small restaurants are closing because of the financial tsunami,†Sun Hung Kai Securities’ Wong said. “Rents have come down a lot and salaries are going to fall so this would improve the company’s margin.â€
Thirty-seven of the 50 new stores planned for the current fiscal year in Hong Kong and mainland China already opened, Chan said at a briefing yesterday.
The fast-food chain is expanding overseas and in China. It operates in Hong Kong under the Cafe de Coral, Oliver’s Super Sandwiches and Spaghetti House names, and in North America runs the Manchu Wok chain. It has a total of 588 outlets worldwide.
Still, the company’s sales at stores open more than a year will probably slow to 4 percent in the six months ending March from 8 percent in the previous period “because people tend to spend less on meals amid an economic downturn,†Chairman Michael Chan said yesterday.
While new products and promotions have helped the chain gain sales, it said 2008 is “undoubtedly the most challenging period the group has ever experienced since†its founding in 1968.
Hong Kong’s retail-sales growth slowed in October to the weakest since 2003, the year of the severe acute respiratory syndrome outbreak and also the last time the city was in a recession.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"