Taste Gourmet: Conviction Growing As Execution Remains Solid

We believe that Taste Gourmet Group Ltd (8371 HK) can deliver a stellar Q2 FY22/H1 FY22 if operations remain uninterrupted in Hong Kong.

• In Q1 FY22, the company delivered its highest quarterly revenue of 145 mn HKD ( Vs. its last highest of 103 mn in Q3 FY21), despite operation being interrupted for over 1.5 weeks in April. We believe that revenue can average over 160 mn HKD in Q2 FY22.
• Profit margins for Q1 FY22 averaged 7.6% due to COVID interrupting operations in April, and the company also took the opportunity to refurbish 2 of its existing restaurants and rebrand its Vietnamese La'Taste brand. With its operations uninterrupted in Q2 FY22 net margins can trend up to 10% on the revenue of 160 mn HKD.

We expect the company to deliver a profit alert for H1 FY2022. We believe that Taste Gourmet Group Ltd (8371 HK) can deliver revenue above 300 mn HKD ( FY21 revenue 379 mn HKD ) and a profit of 28 mn HKD ( equivalent to FY21 profit) for H1 FY22.

The stock trades at an appealing multiple of 6.9x FY22 and 5.7x FY23. With increasing cash flows, we believe the company can increase its dividend payout ratio to 50%. We believe at this payout ratio, the dividend yield for FY22/FY23 equates to 7.2%/9.1%.