A look at Berjaya Food’s recent shareholder changes is pretty interesting. UBS AG, which is BJFOOD’s second largest shareholder has ceased to be a substantial shareholder, previously holding a 5.35% stake. Meanwhile BJCORP (heightened trading lately) and Norges which are BJFOOD’s first and third largest shareholders have been paring their stakes.

However, one would expect that when the largest shareholders are aggressive selling, the stock would fall. The question that beckons is: Who is buying amid the price increase from RM1.55 to RM1.74 when the largest shareholders are selling out? It is obvious that the buyer for those blocks of shares bought them at a premium over the market price. But why?

Berjaya Food used to be a darling among investors, delivering consistent dividends of over 4 cents per annum and trading as high as RM3.00 in December 2014. Back then, the stock commanded a premium in terms of valuation, trading as high as 45x price to earnings ratio. In context, it's parent Starbucks Corp trades at 28x PE on Nasdaq.

The company’s earnings started to fall toward the second half of 2015 caused by a combination of factors including the implementation of GST, the price control and anti-profiteering act 2011, a weakening Ringgit (increasing COGS) and a shift in consumer preference away from Kenny Rogers Roaster.

Along with the weaker earnings, the share price tumbled and has traded within the RM1.50-RM1.80 range for most of 2016.

However, BJFOOD still owns a very prized asset: the Starbucks Coffee Franchise in Malaysia and Brunei. Just how valuable is Starbucks Malaysia today?

BJFOOD had owned only 50% of Starbucks before acquiring the remaining 50% stake it did not own in Starbucks back in 2014 for US$88m. At the time, there were 170 Starbucks outlets in Malaysia. If BJFOOD were to consider selling part or its entire stake of Starbucks Malaysia today, how much would it be worth?

BJFOOD currently operates 216 Starbucks outlets (a 27% increase over 2014) with an additional 28 outlets ready by the end of its FY2017 (April 2017). Disregarding the same store sales growth (SSSG) which was 16% in 2014, flat in 2015 and 5% from 2016, some simple back of the envelope calculations show that 100% of the Starbucks Franchise in Malaysia could be worth as much as US$252.6m using the similar price per outlet paid for in 2014.

In Ringgit terms, thanks to the stronger USD, it would translate to RM1.1b or RM2.94 per share (which also coincides with its previous highs in 2014).

This could be what Starbucks Malaysia alone is worth. Don't forget that BJFOOD also owns 6 Starbucks outlets in Brunei, 95 KKR restaurants in Malaysia, 18 in Indonesia, 2 in Cambodia and 48 Jollibean outlets in Singapore.

BJFOOD to me is a company with a strong moat, being the sole franchisor for Starbucks in Malaysia and Brunei. It is only matter of time that profits will turnaround. The reason I say that is because turnover is still increasing and will get a further boost after raising prices of all products sold. Any incremental amount in the prices of products will likely go straight to profits, as the price of raw materials and foreign exchange rate would remain relatively elevated already as per previous quarters.

As earnings have been bad in the previous quarters and the share price has yet to stage a significant recovery, I believe BJFOOD is still trading at a reasonable price which is below its intrinsic value.