not vested
IN-FLIGHT caterer Brahim’s Holdings Bhd has a two-pronged catalyst moving forward. First, it is exploring ways to increase its market share in the global halal food market, and second, it aims to become the third player to control the Malaysian sugar market.
The company’s core business is airport-centric, focusing on the provision of in-flight catering and restaurant operations. Brahim’s, through its subsidiary, holds a concession with Malaysia Airlines for the provision of in-flight catering and related services.
Analysts have likened Brahim’s business as a proxy to the vibrant airline industry minus the baggage of ticket price war and jet fuel price fluctuations. Currently, close to 90% of its revenue comes from its catering business.
Brahim’s bought a 60% stake in Admuda Sdn Bhd. Admuda has a licence from the International Trade and Industry Ministry to manufacture refined sugar and molasses for Sabah and Sarawak. The licence awarded to Admuda was the third by MITI in 37 years as sugar is a regulated commodity.
Brahim’s is looking to dominate these states by 2015 with the setting up of a RM150mil sugar refinery factory in the Demak Laut Industrial Park in Kuching.
Presently, the sugar market in Malaysia is controlled by Felda Global Ventures Holdings Bhd’s unit, MSM Malaysia Holdings Bhd, and Central Refinery Sdn Bhd, with two sugar refineries each in Peninsular Malaysia.
Brahim’s refinery will have the capacity to produce up to 180,000 tonnes of refined sugar per annum with a potential to expand to 400,000 tonnes.
An analyst from Hong Leong sees Brahim’s pre-tax profit growing 12% to RM57.8mil in FY14 and 32.4% to RM76.5mil in FY15.
Meanwhile, an analyst from Alliance is forecasting Brahim’s pre-tax profit to grow 26.5% to RM64.9mil and 23.6% to RM80.2mil in FY15.
For the nine months to Sep 30, 2013, net profit jumped 163.6% to RM10.19mil while revenue rose to RM285.7mil from RM7.4mil previously.
Catalysts:
- Sustainable earnings from long-term concession agreements.
- Further activities in the sugar refinery business.
- Maiden dividends.
Risks:
- Slowdown in passenger movements.
- Termination of concession agreements.
- Earnings highly dependable on economic conditions/pandemics.
Source: The Star