Brahim’s Holdings (Brahim’s) was the big mover of the day with its share price hitting limit up, and understandably so following an offer from Singapore-listed SATS Ltd for a 49% stake in Brahim’s Airline Catering Holdings Sdn Bhd at RM218m. With RM110m to be paid upon completion of the deal and another RM108m paid conditional upon certain financial targets being met, simple back-of-the-envelope calculations would imply a value of RM444.9m for the entire catering business or RM1.89 per Brahim’s share. Before getting overly-excited however, one point to note is the fact that the operating company, Brahim’s Airline Catering Sdn Bhd is 30%-owned by Malaysian Airlines thereby lopping off RM133.5m of that value mentioned above, though still leaving a credible RM1.32 per Brahim share. The other points of consideration – 1) what are the actual financial terms, as it could mean only RM110m received or the entire RM218m received which could alter valuations dramatically, and 2) the impending loss in earnings through minority interests, which would markedly reduce the intrinsic value attributable to shareholders. That said, we should still see a jump in its share price today regardless of the above musings, but we would advise caution beyond a certain point. On the earnings front, Nestle reported an 8.6% year-on-year rise in its 9MFY15 net profit to RM490.9m while Public Bank recorded a healthy 9.5% year-on-year increase in 9MFY15 net profit to RM3.57bn.

Source: PublicInvest Research - 23 Oct 2015