Stock Focus Brahim’s halal meal venture to provide sizeable new growth avenue

by **Cals** Mon 20 Jan 2014, 18:50

Stock Focus Brahim’s halal meal venture to provide sizeable new growth avenue

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Monday, 20 January 2014 10:56

KUALA LUMPUR (Jan 20): Brahim’s Holdings Bhd’s plan to supply halal meals to offshore oil platforms and distribute ready-to-eat meals and cooking sauces in East Malaysia and Brunei is expected to provide a sizeable new growth avenue for the company as the market is estimated to be worth up to RM90 million annually, according to Alliance IB Research.

Last week, Brahim’s, which provides in-flight catering and restaurant operations, announced that it entered into a Memorandum of Understanding (MoU) with Labuan Halal Hub Sdn Bhd to supply the meals and sauces.

At 10.41am today, Brahim’s rose 8 sen or 4% to RM2.11 with 438,500 shares traded.

In a note today, Alliance IB Research said it was positive on the MoU as it would open up a new growth avenue for Brahim’s catering business.

“Based on our preliminary estimates, the market size of the proposed venture could be up to RM90 million, thus providing a sizeable new growth avenue for the group.

“This will allow the group to diversify from its dependence on the KLIA passenger traffic flow, thereby reducing concentration risk of the group’s revenue and earnings base,” said Tan Kee Hoong, Alliance’s research analyst.

Furthermore, Tan noted PEMANDU (the Performance Management & Delivery Unit) expects another 52,300 jobs to be created by 2020 as a result of various Entry Point Projects within the oil, gas and energy sector.

Tan said he maintains earnings forecasts pending the finalisation of a definitive agreement.

“We reiterate our ‘strong buy’ call for the stock at RM2.03 with target price (TP) of RM2.67, based on 17 times FY15 price earnings ratio (P/E),” he said.

“We believe our premium target P/E multiple is justified by Brahim’s strong growth prospect with a three-year earnings compound annual growth rate of 34.4% from FY13-FY16.”

Tan said he expects a multitude of share price catalysts over the next 12 months.

Meanwhile, Hong Leong Investment Bank Research echoed it is positive on Brahim’s expansion mode to further strengthen its status and branding as a halal meal caterer.

Hong Leong IB research analyst Grace Chew said: “We maintain ‘buy’ with unchanged TP of RM2.64.”

“But accounting-wise, we do not see the collaboration to significantly boost Brahim’s earnings for FY14. Furthermore, the MoU is effective for the period until Dec 31, 2014.”