Investing in Philippines: My personal analysis: JFC - Jollibee Food Corp.


Saturday, September 18, 2010

My personal analysis: JFC - Jollibee Food Corp.

source: (the Jollibee logo is property of Jollibee Food Corp.)

Jollibee Food Corp.(JFC) has been one of the country's top corporation.
Their franchising business has lead Tony Tan Caktiong to achieve new heights in retail business one proof of that was when he was awarded the coveted Entrepreneur of the Year - International Award 2004.

JFC has been one of the companies that withstood the Asian Financial crisis and as the year near its end it again made history by having a record high closing market price of 92.50. 

Core business of the company is franchising the brands  Jollibee ,Chowking, Greenwich, Mang Pepe, Red Ribbon, Delifrance(recently sold), and some foreign brand in China like Yonghe King and Hong Zhuang Yuan. The business has expanded to China, Southeast Asia, United States, and The Middle East.

Based on their website, a franchise ranges from 15,000,000.00 - 30,000,000.00 pesos depending on the store size. Included in the franchise contract are the construction of the store, kitchen equipment and facilities(restaurant point of sale systems,commissary equipments, and storage facilities), furniture and fixtures, air-con system, signage, and pre-operating expenses.  

Looking at their financials through Current Ratio and Quick Ratio is at 1.44 - 1.5 range making it a liquid company as compared to its peers in the industry which is at 1 - 1.12. Debt to Equity Ratio  (MRQ - Most recent quarter)is at a healthy 17 as compared to its peers in the industry which is at 91.

JFC's P/E ratio is at 33 which may indicate that the stock is overpriced as compared to the industry which is at 9.7. But since JFC has proven good returns and stability the high P/E ratio could be judge as just correct. 

Looking at price chart, JFC has reached a record high of 92.50. My  resistance outlook is seen at the 90 level which was recently breached thus a possibility of another breached of this level at the coming months is expected and support is pegged at 75. MACD is above zero and divergence seem to look at a price uptrend only that the recent correction after the PSE's bull run enjoyed nearly a month has pulled its price back to the 85 level.

Stochastic analysis signify that sellers dominated the trade making the stochastic trend downward. This means that most holders of JFC has taken profits when the stock reached its peek at 92.50 the volume is at normal and price was gradually rising not a sudden spike thus we cannot assume that the stock is overbought. 

Recent news on opening of a commissary in mainland China is one of the reasons why JFC's stock price is gradually picking up. News about the sale of one of its brand, Delifrance, was not seen as factor of concern. Letting go of Delifrance will enable JFC to focus on more profitable brands. News of JFC entering the coffee business was seen when a JV(joint venture) with a holder of the franchise Caffee Ti Amo was reported late May this year. To read more about this click 

For newbie stock investors JFC would be a great stock in your portfolio for long term. The recent correction is expected to lurk around until next week and as we have always said buy  stocks of fundamentally sound companies when their prices are down. The expected TP(target price) is the range of 95 -100 at Nov -  Dec 2010 but it is wise to at least take profits by selling half of your stock holdings when it reaches the TP at the expected time(again this is just my personal opinion).

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