Wowprime ambitions downgraded

By Amy Su  /  Staff reporter

Wed, Jul 30, 2014 - Page 14

Wowprime Corp’s (王品集團) recent decision to lower its expansion target for this year because of insufficient staff capacity is expected to impact its sales growth, Fubon Securities Investment Services Co (富邦投顧) said in a research report on Friday last week.

The group, which operates 15 restaurant chains that have more than 385 outlets in Taiwan and China, was aiming to open 100 new venues across both countries this year, but chairman Steve Day (戴勝益) last month cut the figure to 80 — 50 in Taiwan and 30 in China.

“This implies lukewarm sales growth going forward,” Fubon Securities analyst Chloe Wu (吳家瑋) said in the report.

The slower expansion may lead the group’s sales growth in China to decline continuously in the second half of the year, with the achievement of economies of scale and margin recovery set to be delayed further, Wu said.

For its Taiwanese business, the company might lower its expansion target again and shift its focus to lower-end brands given the rising market competition, a shift that could further dilute its profitability, according to Fubon.

Earlier last week, Wowprime’s low-end hotpot restaurant chain, 12 Sabu (石二鍋), said it aimed to have 60 stores in Taiwan and 20 in China by the end of the year, compared with the 44 and 14 it currently has in the two countries respectively. The brand still aims to launch a total of 100 outlets on both sides of the Taiwan Strait in 2017, general manager Chen Jing-yu (陳靜玉) said.

“Wowprime is now more focused on the low-end market,” Wu said. “Low-end brands usually report lower net margins and profitability dilution is likely if the expansion of high-end brands does not gain pace.”

As a result, Fubon said it has lowered its earnings per share forecast for Wowprime by 2.5 percent to NT$14.92 for the year and cut its forecast for next year by 6.7 percent to NT$16.4.

Fubon also cut its revenue forecast for this and next year by 4.5 percent and 8.2 percent respectively to NT$17.47 billion (US$583 million) and NT$20.18 billion.

In the first six months of the year, Wowprime reported consolidated sales of NT$8.42 billion, up 19.54 percent from a year earlier, with net profit in the first quarter standing at NT$288.66 million, or NT$4 per share.

Wowprime shares closed at NT$412 yesterday in Taipei trading, declining 16.77 percent since the beginning of the year.

Fubon advised investors to take profit from the stock now, expecting its share price to fall to NT$330 in the next six months.