Cafe de Coral Holdings' main business is fast food, with Cafe de Coral being a familiar sight in Hong Kong. It also includes speciality restaurant Spaghetti House and Chinese restaurant chain Ah Yee Leng Tong.
A year ago the company welcomed Asia's economic slowdown, assuming that customers would be looking for ways to spend less. With an average meal budget of $27, Cafe de Coral fit the bill.
Merrill Lynch put a long-term buy recommendation on the stock, saying it could see margins improving through cost containment.
Diversification into food-processing and further expansion in the institutional field 'should start bearing fruit', the brokerage said, adding that Cafe de Coral's cut-price fare was likely to continue to benefit from Hong Kong's recession.
At the time the company planned to retain only five or six outlets on the mainland, focusing on Guangdong.
Merrill Lynch agreed with this, given the weak consumption and strong competition in the mainland.
