PHILLIP Capital has downgraded Koufu to "neutral" with a lower target price of S$0.64, from S$0.68 previously, despite increased government support, as it foresees a slower-than-expected recovery in consumption.

This follows Koufu's update on the impact of Singapore's move to Phase 2 (Heightened Alert) on its operations, where dining-in at food outlets is prohibited, social gatherings have been capped at two people, and work-from-home arrangements have been restored.

Although its food outlets remain available for takeaway and delivery orders, reduced footfall in malls and tertiary institutions have had a negative impact on the group's earnings, said Phillip analyst Terence Chua.

The food and beverage (F&B) establishment operator's food courts near offices and in downtown areas, tourist hotspots and tertiary institutions have been heavily affected as employees and students make the switch to working from home or home-based learning.

Reacting to low footfall at these outlets, Koufu has temporarily suspended the operations of its food court and its quick-service restaurant Grove at the Singapore Management University, as well as two R&B Tea kiosks in malls.

Revenue from Koufu's outlet and mall management comprises mainly fixed rental income from stall tenants, but will also be affected by the weak performance of stallholders, as a portion is pegged to stalls' gross turnovers, Mr Chua noted.

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Furthermore, the group's integrated facility construction has been delayed from the second quarter of this year to the third quarter, as Covid-19 restrictions in Singapore and Malaysia, where certain materials are sourced, have caused issues. Koufu obtained the temporary occupation permit for the facility in April 2021 and plans on occupying 75 per cent of the gross floor area, with the remaining space tenanted out.

In Singapore, the Jobs Support Scheme funding amount for the F&B sector has been raised to 50 per cent of wages paid up to June, from 10 per cent previously. Koufu's food courts in Macau have seen marginal improvements from a limited reopening of borders as well as rental waivers and rebates.

However, Mr Chua believes they are unlikely to be sufficient to counter the negative impact of local restrictions. Phillip has lowered its revenue and profit estimates for FY2021 and FY2022.

Shares of Koufu climbed by approximately 0.79 per cent to 63.5 Singapore cents on Monday.