CEO Morning Brief

Berjaya Food Rises on News of Potential Buyout by Vincent Tan

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Publish date: Wed, 10 Apr 2024, 11:11 AM
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TheEdge CEO Morning Brief
BFood, which operates the Starbucks coffee franchise in Malaysia, has lost some 10.3% of its market value since the Gaza conflict started in October last year. (Photo by Zahid Izzani/The Edge)

KUALA LUMPUR (April 9): Berjaya Food Bhd’s (BFood) share price climbed as much as 6.5% on Tuesday after Bloomberg reported the company’s substantial shareholder Tan Sri Vincent Tan as considering taking the Starbucks coffee chain operator private.

The stock hit an intraday high of 66 sen, its highest since mid-December last year, before closing the day at 63.5 sen for a gain of 1.5 sen or 2.4%.

Trading volume soared to 29.83 million shares — the highest level since May last year.

Tan, whose flagship Berjaya Corp Bhd owns 53.85% in Bfood, is in talks with banks about financing for a potential deal, Bloomberg reported, citing people familiar with the matter. The tycoon also holds a direct stake of 5.7%.

“Deliberations are preliminary and Tan could still decide against pursuing a go-private deal for Berjaya Food,” Bloomberg noted.

Should a privatisation exercise materialise, Berjaya Corp and Tan — with their combined 59.56% stake in BFood — would need to buy out 716.53 million shares.

Based on Tuesday’s closing of 63.5 sen, the block of 716.53 million shares would be worth RM455 million.

Assuming a takeover offer at 15% premium, a privatisation deal would cost the tycoon RM523 million.

At the assumed offer price of 73 sen, the shares of the Starbuck coffee chain operator are valued at a price-earnings ratio (P/E) of 130 times, based on trailing 12-month earnings per share of 0.56 sen.

BFood's share price hit a peak at RM1.10 in February last year. The stock was then traded at a P/E of 13.9 times.

BFood has lost some 10.3% of its market value since the conflict in Gaza started in October last year. Starbucks, along with a few other global brands such as fast food chain McDonald’s, have been facing intense boycotts due to their support or perceived link to Israel in the conflict.

As at Dec 31, 2023, BFood had cash and bank balances of RM33.51 million and a deposit of RM11.1 million.

It had total borrowings of RM263.78 million, of which RM220.1 million are short term borrowings.

BFood booked a net loss of RM42.58 million for the second quarter ended Dec 31, 2023, bringing the total loss for the first half of the year to RM23.55 million, against a net profit of RM70.19 million for the previous year’s corresponding period. The weak quarterly performance was attributed to the boycotts and a RM10.5 million one-off loss from the disposal of the company's entire equity interest in Jollibean Foods Pte Ltd.

Quarterly revenue fell 38.19% to RM182.55 million versus RM295.32 million previously, bringing six-month revenue to RM461.09 million, down by 20.28% from RM578.37 million previously.

BFood has said that it expects its operating performance to show improvement in the remaining two quarters.

Bloomberg data showed that four research houses have issued a “sell” call on BFood, against one with a “buy” call, with a 12-month average target price of 53 sen.

This implied a downside of 16.53% compared to Tuesday’s closing price of 63.5 sen.

Source: TheEdge - 10 Apr 2024

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