JFC earlier announced the acquisition of Compose Coffee, one of South Korea’s fastest growing cafes, with over 2,600 branches in the country.
JFC is investing P14 billion to acquire 70 percent of Compose Coffee. Its international unit Titan Dining II will acquire 5 percent while private equity firm Elevation Equity Partners Korea Ltd. will own 25 percent.
Immediate benefit
JFC said the purchase will help its expansion within the coffee and tea segment, a key pillar of its growth strategy.
Compose Coffee is expected to raise revenues by 2 percent, increase earnings before interest and taxes by 12 percent, and bring its overall store count nearer to 10,000 outlets globally.
It justified the purchase price by noting it was valued at 8 times earnings before interest, taxes, depreciation, and amortization, suggesting the company is undervalued.
Jollibee is a buy
Joey Cipres, AP Securities research analyst, likes the deal and the strong growth prospects of Compose Coffee.
“Additionally, despite [Compose Coffee] having only been established in 2014, the latest data shows that [Compose Coffee] has already managed to grab 8 percent of the South Korean coffee industry,” he said in a report.
Cipres said this supports their buy rating on JFC with a target price of P335.28 per share.
“We see this acquisition as a positive development that would further JFC’s 50-50 international to PH revenue split by [full-year 2028], alongside it being immediately earnings accretive for shareholders as well,” he added.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
