KUCHING: Brahim’s Holdings Bhd (Brahim’s) is gradually diversifying its business from airline catering.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a note yesterday said the group is diversifying its business with the proposed acquisition of franchise business of Burger King (BK) Malaysia and Singapore for a consideration of RM95 million.
Besides, the research house said the company is moving upstream in the food and beverage (F&B) business.
Kenanga Research noted Brahim’s has recently entered into a business joint venture with Australia’s Carpenter Beef Pty Ltd for the development of a halal-compliant abattoir in Perth, Australia.
The research firm believes the move will provide Brahim’s group better control and cost savings in terms of raw material for both its airlines catering needs as well as for the Burger King’s franchise business should the deal materialises.
Kenanga Research added Brahim’s group is looking to reduce its dependency on the dominant airline catering business to a more balanced mix with F&B business.
The research firm foresees the group to seek further acquisition opportunities in the F&B business line in the near future.
On another note, Kenanga Research observed that Brahim’s group is also aiming to turn around its loss-making entities through various marketing and product strategies.
The research house believes that it will take the group two to three years’ time to turn around the loss-making business.
Financially, Kenanga Research noted Brahim’s earnings for the nine months of 2014 were affected due to cost reduction initiatives on lower average selling prices of meals on Malaysian Airlines (MAS) flights attributable to lower passenger volume travelled by Malaysian Airlines (MAS) amid last year’s aviation catastrophe.
The research firm said although MAS flights accounted for more than 70 per cent of the total arilines meals sales of Brahim’s, Kenanga Reseach do not expect a sharp decline in the financial performance of Brahim’s.
Nonetheless, it believes Brahim’s profit margin are projected to moderate as contracts with other airlines offer lower profit margins compared to MAS.
Hence, the research firm is mixed on the outlook for Brahim’s group at this juncture, valuing the company’s share price with a fair value of RM1.30 per share.