Saudi deal to boost Brahim’s FY15 earnings

Saudi deal to boost Brahim’s FY15 earnings
Posted on 13 March 2014 - 05:38am
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PETALING JAYA: Brahim's Holdings Bhd's latest deal with a Makkah-based company will boost its FY15 earnings significantly, potentially increase profit after tax and minority interest (Patami) to RM37.4 million from RM33 million, based on the assumption of a 60:40 split between Brahim's and Dhyafa Albalad Alameen Co Ltd respectively.

Hong Leong Investment Bank Bhd (HLIB) has maintained its buy recommendation on Brahim's with a higher target price of RM3.13 from RM2.90 as it is positive on the deal.

On Tuesday, Brahim's announced that it has entered into a memorandum of understanding with Dhyafat to formalise their intention to collaborate and establish a joint venture company to develop food manufacturing, production and services in the city of Makkah, Saudi Arabia.

"We are positive on the announced deal as it would further enhance Brahim's status as a halal meal caterer, with potential of establishing a strong foothold in the Middle East," HLIB said in a note yesterday.

It pointed that the group expects profit from the venture to start contributing in FY15 as it will be delivering halal meals to Makkah from Malaysia during the construction period of the factory.

It said the factory will be built on a 60-acre land located at the boundary outside of Makkah with the construction period of 16 months.

HLIB said potential capital expenditure (construction of factory/kitchen) to be incurred for this venture ranges between US$40-US$45 million (RM131-RM147 million) with Saudi Arabian borrowings while finance costs could go as low as 2% per annum.

It also raised the earnings per share by 8% and 19% respectively for FY15 and FY16, based on an enlarged share base of 236.3 million, after pricing in the potential contribution from the new business venture and the potential delay of the commencement of its sugar business to FY16.