Highlights

Based on statistics released by MAS’ and MAHB’s 9MFY13 results, we believe Brahim’s 9MFY13 results (to be released on 28th Nov) to be better-than-expected, mainly from higher number of passengers carried by MAS, assuming that average price per meal remain constant.

Referring to Figure 1, MAS total passengers carried in 9MFY13 experienced double-digit growth of 28.8% to 12.5m passengers compared to 9.7m in 9MFY12 (vs. HLIB’s yoy growth estimates of 20.4%). This already accounts for 77.3% of our full year estimates for MAS’ passengers carried (above expectations).

On the other hand, MAHB’s 9MFY13 passenger movement statistics (Figure 2) of 34.4m passengers (+18.1% yoy) came in slight above our estimates, accounting for 74.9% of our FY13 forecasts. In-house forecasts MAHB’s passenger movements to grow at 15.2% yoy.

Given such positive performance by both MAS and MAHB, there could be a potential upgrade on our forecast for Brahim’s. Moreover, we also foresee 4Q to be strong on the back of seasonality factors (festive seasons and year-end school holidays).

As for its Café Barbera business, we believe that the division would continue to bleed, albeit marginally. Thus far, Brahim’s have close down its outlet in Sunway Pyramid and also intend to close down its Setia Walk outlet. As such, we estimate that Café Barbera business would incur a smaller loss in FY13 (less than RM500k).

Risks

• Pandemic outbreaks.
• Slowdown in passenger movements.
• Termination of concession agreements.
• Relatively elastic demand.
• Appreciation of US$ and/or depreciation of RM.

Forecasts

Unchanged for now. However, HLIB’s forecasts are likely to be upgraded from higher-than-expected no. of passengers carried by MAS, assuming average price per meal remain constant, which would be partially offset by the 2-4% dilution from an enlarged paid-up capital post-private placement exercise.

Rating

HOLD

Positives – (1) Niche industry; and (2) Sustainable earnings from long-term concession agreements.

Negatives – (1) Earnings highly dependable on economic conditions/pandemics; (2) Delay in the opening of KLIA2 and sugar refinery plant in Sarawak; and (3) Additional borrowings for any asset injections could increase net gearing significantly.

Valuation

Maintain HOLD with unchanged TP of RM1.56 based on industry average of 14.9x FY14’s EPS and 7.0x FY14’s EV/EBITDA.

However, any positive changes to our forecasts (based on MAS and MAHB numbers) could potentially increase our TP to RM1.70, upgrading our recommendation to BUY.

Source: Hong Leong Investment Bank Research- 21 Nov 2013