Wednesday, September 4, 2013


30 JEWELS 2013 Edition

Brahim’s Holdings
Target: MYR1.41
Price: MYR0.95
52-wk Price low/high (MYR) 0.75 - 1.16
A Billion Dollar Deal

Investment Merits
¨ Operator of the world’s largest halal flight kitchen
¨ Riding on the growth of passenger traffic from the upcoming KLIA2
¨ Potential M&As to grow the Group into a global halal food player with billion-ringgit revenue

Company Profile
Brahim’s Holdings (Brahim’s) is Malaysia’s leading halal in-flight catering company through wholly-owned Brahim’s-LSG Sky Chefs (BLSG), which in turn owns 70% of LSG Sky Chefs-Brahim’s (LSGB). In Feb 2013, BLSG and LSGB were renamed Brahim’s Airline Catering Holdings (BACH) and Brahim’s Airline Catering SB respectively.

Global halal F&B giant in the making. Brahim’s has a 70% stake in LSGB, which is mainly involved in the provision of in-flight catering and related services such as cabin handling. The Group holds the exclusive rights to provide in-flight catering and cabin handing services to Malaysia Airlines (MAS) at Kuala Lumpur International Airport (KLIA) and Penang International Airport for 25 years beginning 2003.

KLIA 2 will spur growth. The Group also owns a 51% stake in Dewina Host SB, which it acquired in July 2011 from Dewina Holdings SB for MYR20m in cash. Dewina Host operates restaurants and cafes in KLIA and LCCT including Burger King, Taste of Asia and Café Barbera outlets. We believe this segment has huge growth potential when the hybrid airport KLIA2 commences operations in mid-2014, which would lead to more such outlets to be opened.

More M&As in the pipeline? As it continues to expand, we believe there could be more potential asset injections ahead. The potential candidates are: i) Dewina Food Industries SB, which manufactures Brahim’s sauces and ready-to-eat meals, and ii) Desatera SB, which  has a 15-year military catering contract expiring in 2026. Both companies are under Dewina Holdings, which is privately-owned by Brahim’s major shareholder Datuk Ibrahim bin Haji Ahmad. We believe the potential deal will enlarge the market of its halal food empire.

Company Report Card
Latest results. Its 1Q13 revenue surged 95% y-o-y, as a result of its enlarged stake from 51% to 100% in BACH. Brahim’s completed the acquisition of the remaining 49% stake in BACH to make the company its wholly-owned subsidiary in Jan 2013. Similarly, group core earnings improved from MYR0.7m to MYR3.8m y-o-y (excluding a one-off MYR5.6m acquisition cost) for the quarter.

Balance sheet. As at March 2013, the Group’s net gearing had  retched to 69.5% due to borrowings incurred to acquire a 49% stake in BACH during the quarter.

ROE. We expect ROE to improve from the mid single-digits to high single-digits in the next two years on the back of steady earnings.

Dividend. In view of better profitability, Brahim’s is considering paying out dividends in the future to reward its shareholders. However, we believe the payout will not be significant as the Group is still expanding aggressively.

Management. Executive chairman Datuk Ibrahim bin Haji Ahmad is a specialist in food and agricultural consulting. Since taking over, he has injected food-related businesses into the Company, transforming it into an F&B player.

We are optimistic that with BACH now being a wholly-owned subsidiary, the Group will likely achieve our FY13 core net profit forecast of MYR17m. Our FV of MYR1.41 is based on 18x (the F&B industry’s average P/E) FY13 core EPS. We believe Brahim’s is on the road to hit the MYR1bn revenue target by 2017, as it rides on the: i) potentially better contribution from airport F&B outlets upon the opening of KLIA2, ii) stronger performance from its in-flight catering business due to higher passenger traffic, and iii) accretive M&As in the pipeline,

Source/Extract/Excerpts/来源/转贴/摘录: RHB-Research,
Publish date:30/07/13

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