"This stock is well suited to these difficult times, when unemployment is rising. People are very cautious about spending, not shelling out for a HK$1,000 ($130) meal but maybe a HK$20 meal," Alan Wong at Indosuez W.I. Carr Securities Ltd said.

The company chairman called the economic slump a "blessing in disguise".

Cafe de Coral said on Thursday its net profit edged up 1.09 per cent to HK$142.53 million in 1997/98.

Net profit was calculated after an exceptional items loss of HK$8.11 million in 1997/98 versus an exceptional items gain of HK$29.33 million the previous year.

Operating profit surged 33 per cent to HK$180.01 million from HK$135.83 million in 1996/97. The company's overall profit margin rose by 1.5 percentage points to 8.5 per cent in 1997/98.

"The results are slightlybetter than expected," said Patricia Wong, an analyst at Vickers Ballas Hong Kong Ltd.

Shares of Cafe de Coral eased HK$0.025 to finish at HK$2.425 on Friday on profit-taking, but are up 43.5 per cent so far this year.

"It has been a very strong out performer of the market, I think it's up 124 per cent relative to the market on a one-year basis," said one analyst at ABN AMRO Asia Ltd, who asked not to be identified.

The blue chip Hang Seng Index has dropped 19.5 per cent since the beginning of the year, dragged down by the regional financial crisis and Hong Kong's own economic downturn.

"We are optimistic about the company since it has opened a restaurant at the new (Chek Lap Kok) airport which will benefit its long-term growth," Vickers' Wong said. The group's strategy to boost institutional catering and expand its outlets to new mass residential areas should also boost its sales, she said.

Cafe de Coral has 117 fast food outlets as well as speciality restaurant chains, home delivery andinstitutional catering. "Consumers are very defensive about their earnings and so they will be trading down on their food consumption and Cafe de Coral fits right into that level of spending for food," Alan Wong said.

The company also said a dramatic change in consumer spending habits due to the Asian financial crisis had significantly benefited the group's fast food performance in 1997/98 as consumers shifted to cheaper goods, especially in the food and beverage industry.

"I personally see the economic slowdown as a blessing in disguise and a unique opportunity for growth," Cafe de Coral chairman Michael Chan said in a statement. The group was one of the companies most sensitive to rentals, Alan Wong said. "This is really their market because rentals are coming down now," he said.

Cafe de Coral said it had successfully renegotiated a considerable number of its leases on more favourable terms, which would have a positive impact on its operating results now and in years to come.

Vickers recommended abuy on the company's shares at around HK$2.20 with a 12-month target at HK$3.20.

The ABN AMRO analyst said Cafe de Coral was a defensive stock in this market and its revenue would continue to grow steadily although probably not at a double-digit rate.

He said that since the stock had out performed the market strongly, he was not sure how much upside there was left. "In terms of PE (price/earnings) multiple, it is still quite cheap," he added.