Brahim's keen on Burger King takeover
Published on: Thursday, September 18, 2014
PETALING JAYA: Brahim's Holdings Bhd, reeling from the twin aviation disasters that befell Malaysia Airlines (MAS), may be trying to ease the shortfall from possible route cuts by acquiring a food-based company.The company told Bursa Malaysia it was exploring the business opportunity and engaging in preliminary discussions on buying the Burger King franchise.It has not concluded or entered into any definitive agreement to buy the Burger King franchise. It was reported that Brahim's was close to sealing a deal to buy state-owned Ekuiti Nasional Bhd's (Ekuinas) stakes in Burger King Malaysia and Singapore.
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Ekuinas owns 74.1pc of Cosmo Restaurants Sdn Bhd, which holds the local Burger King franchise, and 100pc of Burger King Singapore.The private equity firm has so far splashed out RM117mil to acquire the popular fast-food chain.Datuk Ibrahim Ahmad Badawi, the brother of former Prime Minister Tun Abdullah Ahmad Badawi, owns 40.63pc of Brahim's.He did not respond to text messages seeking comment.
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"We are positively surprised by the news, as it would allow Brahim's to diversify its earnings away from MAS," Hong Leong Investment Bank (HLIB) Research told clients in a note.The national carrier currently accounts for 75pc and 90pc of Brahim's revenue and profit, respectively. Any pullback in MAS' routes or renegotiation of catering services would, thus, constrict Brahim's bottom line.
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"Furthermore, recent unfortunate events (MH370 and MH17) have significantly impacted Brahim's operations, resulting in the weaker-than-expected first-half 2014 results. Brahim's first half experienced a drop in revenue and profit after tax and minority interest by 0.5pc and 29.3pc, respectively."HLIB Research noted that with MAS' impending privatisation and turnaround plans, Brahim's could experience a slight compression in profit margins if it has to reduce average selling prices for its meals."Hence, we believe it is sensible for Brahim's to take the initiative to acquire Burger King to diversify its future earnings (only if the valuation is fair), as well as to make up for the lower profits in its airline catering business segment."Pricing for the acquisition has, however, not been revealed at this juncture. Besides the talks to acquire Burger King, we also strongly opine that Brahim's would be eyeing for more merger and acquisition opportunities in either food and beverage or the airline catering segment to diversify and expand its foothold internationally," the research outfit explained.Shares of Brahim's have tumbled 48 sen, or 26.09pc, year-to-date, but at its worst, the stock was down 55.93pc to RM1.19 from a peak of RM2.70. The counter has since rebounded, gaining 11 sen at the close yesterday to RM1.35 on trade of 6.9 million shares.The group, nonetheless, is putting up a brave front, saying recently that its 70pc-owned Brahim's Airline Catering Sdn Bhd, which holds a lucrative 25-year concession to supply in-flight meals to MAS, would not lose its contract with the flag carrier.Ibrahim had told StarBiz last week that he expected a "positive outcome" from a meeting last Friday to discuss the fate of its catering contract, which would come under the spotlight as MAS undertakes sweeping changes in an ambitious overhaul by Khazanah Nasional Bhd. "At any rate, we will remain as the supplier for MAS," Ibrahim had said.Stay up-to-date by following Daily Express’s Telegram channel.
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