KUCHING: Analysts are generally still positive on Brahim’s Holdings Bhd (Brahim’s) following their latest meet-up with the management which had also included an update on the sugar refinery project in East Malaysia.
According to the research arm of Hong Leong Investment Bank Bhd (HLIB Research), it has gathered more information with regards to the future plans of the sugar refinery project in East Malaysia.
HLIB Research highlighted that the shareholders of Admuda have discussed about the ongoing sugar refinery project and as such, Brahim’s has come up with two alternatives.
These included disposing its 60 per cent to the promoters with no gain or losses, or promoters to capitalise all the cost incurred during the pre-construction phase (land clearing, etc).
“As a result, Brahim’s 60 per cent stake will be diluted from a subsidiary to an associate level,” the research arm pointed out, adding that the latter option seemed to be more favourable to Brahim’s but nothing is firm yet at this juncture.
It further noted that Brahim’s have not paid any capital expenditure (capex) on the project besides the 20 per cent deposit for the land acquisition of RM14 million.
Moving on, HLIB Research highlighted that Brahim’s plans to expand its in-flight catering foothold internationally by acquiring stakes in other international airports. The research arm noted that the group is currently in discussion with airports in China and is also planning to approach Aerofood Catering Service (ACS-Garuda Indonesia).
“We believe there is probability for the plans to materialise as Brahim’s holds a renowned Halal certification which is recognised worldwide,” it opined.
On its existing business, HLIB Research pointed out that Brahim’s catering operations were largely not impacted by the MH370 incident where it recorded consistent monthly meal productions from January to May 2014 of circa one million meals per month.
It further highlighted that Brahim’s also plans to negotiate with Host Marriott Services Corp (HMSHost) to buy out the latter’s 49 per cent stake in D-Host, which would enable Brahim’s to consolidate 100 per cent of D-Host’s earnings.
“Note that earnings from D-Host are currently equity accounted,” the research arm added.
As for the losses from Café Barbera, HLIB Research pointed out that it is expected to narrow to circa RM0.8 million, versus RM2 million loss in financial year 2013 (FY13) for FY14.
“The group also plans to acquire the Café Barbera outlet in Indonesia, which currently generates circa RM180,000 per month.
“Acquisition costs will be offset by the RM700,000 seed money injected in FY12,” it said.
Overall, despite numerous plans and initiatives mentioned the research arm is keeping its numbers for now, explaining that it will only be imputing these contributions as and when these initiatives solidify and as such, HLIB Research maintained ‘buy’ on Brahim’s.