MONDAY, 16 MAY 2016

Jollibee Foods Corporation:

1Q16 net income up 17.7% to Php1.4Bil, in line with estimates
SHARE DATA
1Q16 net income up 17.7% to Php1.4Bil. JFC reported that 1Q16 net income grew by 17.7% Rating HOLD
y/y to Php1.4Bil. Results were in line with estimates as 1Q16 net income accounted for 21.2% Ticker JFC
and 20.9% of COL and consensus forecasts, respectively. Growth was driven by healthy Fair Value (Php) 175.50
revenue growth as well as modest margin expansion. Revenues increased 13.5% to Php26.1Bil, Current Price 237.80
in line with expectations at 23.5% and 22.7% of COL and consensus forecasts, respectively. Net Upside (%) -26.20
margin expanded 20bps to 5.4% due to stable input costs and lower advertising costs, partially
offset by high net losses from joint ventures. (see exhibit 1)

Net sales up 13.5% despite flat China growth. JFC reported that net sales increased by 13.5% SHARE PRICE MOVEMENT
to Php26.1Bil, in line with expectation at 23.5% and 22.7% of COL and consensus forecasts,
120
respectively. Systemwide sales grew 14.8% to Php34.3Bil, driven by 8.0% same store sales
growth and a 6.8% increase in store network. Philippine sales grew 16.0% in 1Q16 while foreign
110
sales grew 10.5%. Sales from China grew by only 1.9% due to sales pressure from recovering
competing brands. However, strong growth in the US (+17.4%) and Southeast Asia and the
Middle East (+32.2%) compensated for slow growth in China. Vietnam alone grew sales by 100

48.2% in local currency terms. As of end-1Q16, JFC had 3,143 stores, 6.8% more y/y.
90

Margins expand on lower A&P spending due to timing. Net margin expanded by 20bps to
5.4% in 1Q16. The modest margin expansion was due to stable input costs and lower advertising 80
16-Feb-16 16-Mar-16 16-Apr-16 16-May-16
costs. Advertising and promotion expense fell 15.6% in 1Q16. However, this may normalize in
JFC PSEi
succeeding quarters as JFC said that the decline was largely due to timing factors. This was
partially offset by higher equitized net losses from joint ventures. Equitized losses, which now
includes the recently acquired stake in Smashburger, more than doubled to Php69.1Mil in 1Q16
from Php30.0Mil in 1Q15. ABSOLUTE PERFORMANCE

Maintain HOLD rating. We currently have a HOLD rating on JFC with a FV estimate of
1M 3M YTD
Php175.50/sh. At its current price of Php234/sh, JFC remains expensive, trading above our FV JFC 4.21 13.35 8.58
estimate and is being valued at 38.5X P/E. Nonetheless, revenue growth remains stable and PSEi 2.09 10.83 7.51
cost outlook is positive for 2016. We continue to like JFC for the long-run for being dominant
in the domestic quick service restaurant sector as well as for the improving profitability of its
international business.
MARKET DATA
FORECAST SUMMARY
Year to December 31 (Php Mil) 2014 2015 2016E 2017E Market Cap 254,876.38Mil
Revenues 90,671 100,780 111,175 121,371 Outstanding Shares 1,071.81Mil
% change y/y 12.9 11.1 10.3 9.2
52 Wk Range 175.50 - 239.20
Gross Profit 16,943 17,888 21,012 23,182
%change y/y 13.0 5.6 17.5 10.3 3Mo Ave Daily T/O 217.48Mil
Gross Profit Margin (%) 18.7 17.7 18.9 19.1
Operating Income 6,137 5,355 8,227 9,224
%change y/y 3.5 -12.7 53.6 12.1
Operating Margin (%) 6.8 5.3 7.4 7.6
Net Income 5,362 4,929 6,593 7,448
%change y/y 14.8 -8.1 33.8 13.0
Net Margin (%) 5.9 4.9 5.9 6.1
EPS (in Php) 4.96 4.53 6.10 6.89
%change y/y 13.6 -8.6 34.7 12.9
Jed Frederick Pilarca
RELATIVE VALUE
P/E(X) 47.9 52.4 38.9 34.4 jed.pilarca@colfinancial.com
P/BV(X) 9.4 8.4 7.3 6.4
ROE(%) 21.6 17.0 20.0 19.6
Dividend Yield (%) 0.6 0.7 0.7 0.9
*Source: JFC, COL est imat es
 PHILIPPINE EQUITY RESEARCH

Exhibit 1: Results Summary

% of full year forecast
in PhpMil 1Q15 1Q16 % Change
COL Consensus
Revenues 23,003 26,102 13.5 23.5 22.7
Gross Profit 4,082 4,670 14.4 22.2 21.6
Gross Margin (%) 17.7 17.9 0.1 - -
Operating Income 1,450 1,738 19.9 21.1 20.2
Operating Margin (%) 6.3 6.7 0.4 - -
Net Income 1,188 1,398 17.7 21.2 20.9
Net Margin (%) 5.2 5.4 0.2 - -
Source: JFC, COL estimates, Bloomberg

MONDAY, 16 MAY 2016 JFC I EARNINGS ANALYSIS page 2

 PHILIPPINE EQUITY RESEARCH

Investment Rating Definitions

BUY HOLD SELL

Stocks that have a BUY rating have attractive
fundamentals and valuations, based on
our analysis. We expect the share price
to outperform the market in the next six to
twelve months.
Stocks that have a HOLD rating have either We dislike both the valuations and
1.) attractive fundamentals but expensive fundamentals of stocks with a SELL rating.
valuations; 2.) attractive valuations but We expect the share price to underperform in
near term earnings outlook might be poor the next six to twelve months.
or vulnerable to numerous risks. Given the
said factors, the share price of the stock may
perform merely inline or underperform the
market in the next six to twelve months.

Important Disclaimers

Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may
be incomplete or condensed. All opinions and estimates constitute the judgment of COLs Equity Research Department as of the date of the report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of
securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605 Philippines
Tel: +632 636-5411 Fax: +632 635-4632 Website: http://www.colfinancial.com

MONDAY, 16 MAY 2016 JFC I EARNINGS ANALYSIS page 3