By Sharen Kaur
KUALA LUMPUR: Brahim's Holdings Bhd expects a quantum leap in net profit and revenue in the current year, to be driven by its wholly-owned subsidiary Brahim's-LSG Sky Chefs Holdings Sdn Bhd (BLSG), says director Datuk Howard Choo.
The group yesterday completed the process to buy the remaining 49 per cent stake it does not already own in BLSG from its German partner, LSG Asia GmbH, a company owned by Deutsche Lufthansa AG, in a deal worth RM130 million.
In a filing to Bursa Malaysia, Brahim's said it also signed a two-year technical assistance agreement with LSG Catering Hong Kong Ltd for electronic data processing as well as cost control and management technics.
Choo said the agreement will help Brahim's maintain global standards in catering and the halal requirement.
BLSG is an important asset for Brahim's, a manufacturer of famous household brand Brahims, as it owns 70 per cent of LSG Sky Chef-Brahim's Sdn Bhd (LSGB).
LSGB, which operates the in-flight catering business, is 30 per cent owned by Malaysia Airlines (MAS). It has a 25-year concession until 2028 to provide catering and related services to MAS at the Kuala Lumpur International Airport (KLIA) and the Penang Airport.
Besides MAS, LSGB also caters for 35 other airlines that land at KLIA. The company's operation in Penang caters to 10 airlines.
"This acquisition is important because it would give us a quantum leap in earnings. The immediate impact on Brahim's is that the group can now consolidate the net profit and revenue from BLSG by 100 per cent, instead of 35.7 per cent previously.
"Prior to the acquisition, Brahim's had to equity account its 51 per cent holding in BLSG. Now, it can fully recognise all the earnings," Choo told Business Times in an interview yesterday.
For fiscal 2010 and 2011, the total revenue generated by BLSG was RM314.1 million and RM336 million, respectively. As Brahim's held 51 per cent of BLSG, it could only equity account RM165.8 million and RM184.4 million, respectively.
"Instead of raking in around RM165 million and RM185 million in revenues a year from BLSG, we will now be able to generate over RM300 million a year from the company," Choo said.
Analysts viewed the deal positivelly as it would boost Brahim's net profit by 15 to 16 per cent a year.
"The jump in revenue and net profit will double for Brahim's in the current year. From 2014, there will be double-digit growth year-on-year. We estimate BLSG to contribute some RM348 million to Brahim's revenue next year, and close to RM360 million in 2015," said an analyst, who spoke on condition of anonymity.
This means Brahim's will be able to wipe out the RM170 million accumulated losses incurred by MAS Catering Sdn Bhd when it took over the business in 2003, by the end of this year.
MAS, which owned MAS Catering, had incurred losses to the tune of about RM200 million from the business with negative shareholders' funds of about RM80 million.
Choo said now that it has acquired the balance of shares in BLSG, it would embark on a RM2 million rebranding exercise, which includes the renaming of BLSG and LSGB, as well as changing the logo and signages.
According to Choo, BLSG would be renamed Brahim's Sdn Bhd, and LSGB, Brahim's Airlines Catering Sdn Bhd. It would be seeking approval from MAS on the matter.
sharen@nstp.com.my
Published in NST on January 8, 2013
The group yesterday completed the process to buy the remaining 49 per cent stake it does not already own in BLSG from its German partner, LSG Asia GmbH, a company owned by Deutsche Lufthansa AG, in a deal worth RM130 million.
In a filing to Bursa Malaysia, Brahim's said it also signed a two-year technical assistance agreement with LSG Catering Hong Kong Ltd for electronic data processing as well as cost control and management technics.
Choo said the agreement will help Brahim's maintain global standards in catering and the halal requirement.
LSGB, which operates the in-flight catering business, is 30 per cent owned by Malaysia Airlines (MAS). It has a 25-year concession until 2028 to provide catering and related services to MAS at the Kuala Lumpur International Airport (KLIA) and the Penang Airport.
Besides MAS, LSGB also caters for 35 other airlines that land at KLIA. The company's operation in Penang caters to 10 airlines.
"This acquisition is important because it would give us a quantum leap in earnings. The immediate impact on Brahim's is that the group can now consolidate the net profit and revenue from BLSG by 100 per cent, instead of 35.7 per cent previously.
"Prior to the acquisition, Brahim's had to equity account its 51 per cent holding in BLSG. Now, it can fully recognise all the earnings," Choo told Business Times in an interview yesterday.
For fiscal 2010 and 2011, the total revenue generated by BLSG was RM314.1 million and RM336 million, respectively. As Brahim's held 51 per cent of BLSG, it could only equity account RM165.8 million and RM184.4 million, respectively.
"Instead of raking in around RM165 million and RM185 million in revenues a year from BLSG, we will now be able to generate over RM300 million a year from the company," Choo said.
Analysts viewed the deal positivelly as it would boost Brahim's net profit by 15 to 16 per cent a year.
"The jump in revenue and net profit will double for Brahim's in the current year. From 2014, there will be double-digit growth year-on-year. We estimate BLSG to contribute some RM348 million to Brahim's revenue next year, and close to RM360 million in 2015," said an analyst, who spoke on condition of anonymity.
This means Brahim's will be able to wipe out the RM170 million accumulated losses incurred by MAS Catering Sdn Bhd when it took over the business in 2003, by the end of this year.
MAS, which owned MAS Catering, had incurred losses to the tune of about RM200 million from the business with negative shareholders' funds of about RM80 million.
Choo said now that it has acquired the balance of shares in BLSG, it would embark on a RM2 million rebranding exercise, which includes the renaming of BLSG and LSGB, as well as changing the logo and signages.
According to Choo, BLSG would be renamed Brahim's Sdn Bhd, and LSGB, Brahim's Airlines Catering Sdn Bhd. It would be seeking approval from MAS on the matter.
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