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Max’s Group Nine-Month Profit Down; Dividend Sustainability Under Scrutiny


Max’s Group, Inc. (PSE: MAXS), operator of iconic restaurant brands including Max’s Restaurant, Pancake House, and Yellow Cab, reported a 14% drop in net income to ₱160 million for the nine months ended September 30, 2025, compared to ₱186 million in the same period last year. The decline came as inflationary headwinds and higher financing costs weighed on profitability despite seasonal resilience and operational streamlining.

Revenues slipped 2.8% year-on-year to ₱8.58 billion, while system-wide sales fell 3.8% to ₱13.2 billion. The group cited softer consumer sentiment and a smaller store footprint—566 outlets versus 626 a year ago—following its ongoing network rationalization strategy. Still, same-store sales growth reached 1.4%, supported by targeted value offerings and improved average daily sales, which rose 9.9%.

Margins compressed as gross profit dropped 8.4% to ₱2.47 billion, with gross margin narrowing to 28.8% from 30.6% last year. EBITDA declined 9.1% to ₱983 million, while EBIT fell nearly 20% to ₱411 million. Finance costs edged up to ₱210 million, reflecting higher interest and lease expenses, further pressuring bottom-line results.

On the expense side, general and administrative costs eased 1.4% to ₱2.0 billion, while selling and marketing expenses plunged 40% to ₱184 million due to tighter promotional spending. Other income also softened to ₱128 million from ₱150 million.

The balance sheet showed total assets at ₱12.78 billion, down 5.2% from year-end 2024, with cash declining to ₱692 million from ₱1.06 billion. Debt-to-equity improved to 1.22x from 1.53x, signaling progress in deleveraging.

Management reaffirmed its focus on margin resilience, cost discipline, and footprint optimization, while noting that Q4—traditionally a peak season—will be critical for recovery. “We continue to prioritize operational efficiency and brand relevance to navigate macro volatility,” the company said in its filing.

Dividend Sustainability: Covered but Tight in Downside Scenarios

Max’s paid ₱145.95 million in cash dividends in May 2025 (₱0.141/share), representing roughly 67% of nine-month earnings. While operating cash flow of ₱489 million covered the payout comfortably, free cash flow after capex was thin at ₱34 million, highlighting limited buffer for reinvestment.

Forecast models suggest the current dividend is sustainable under base and bull recovery scenarios, with FY 2025 payout ratios ranging 54–68% and interest coverage near 2×. However, in a bear case—where wage hikes and power costs persist—the payout could exceed 85% of earnings and push interest coverage toward 1.7×, leaving little room for shocks.

For FY 2026, sustainability improves if inflation stays within BSP’s target and financing costs ease: payout ratios could fall to 30–51% in base/bull cases, with interest coverage rising above 2.3×. Conversely, under prolonged cost pressure, dividends may need to be cut or deferred to preserve liquidity and covenant compliance.

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