Jollibee (JFC) has been touting its overseas expansion and acquisitions over the years. Over the years JFC acquired Milkshop, Tim Ho Wan, Coffee Bean and Tea Leaf, Smashburger among others.
These acquisitions were expected to propel the growth of JFC’s bottom line and thus grow shareholder value. But the opposite seems to happen.
In 2022 Q1, JFC reported an operating income of 1.998 billion. But that operating income has been almost obliterated by the cost of borrowing which totaled 1.046 billion. JFC borrowed heavily to fund its acquisitions and the costs of those borrowings are eating up operating income. Worse is that the acquisitions have only marginal contributions if any to the operating income.
Jollibee bannered a 2.3 billion net income in Q1 2022. A closer look of Jollibee’s Q1 2022 net income will show that the net income has been padded by a non-cash gain on transfers of land properties to a related party, CentralHub.
In the cash flow side, JFC did not generate enough cash flows from operations in Q1 2022 to pay for long-term debt. JFC’s cash flows from operations in Q1 2022 was only 2.916 billion while long-terms debts repayment wat at 3.568 billion.
JFC’s share price is only 19% down from its 52-week high of 259.80 despite the negative sentiments in the market right now. But traders must be ready when the hype over the acquisitions fades and JFC’s share price finally meets financial reality.
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