Results

• In line: Brahim’s 9MFY17 core net loss of RM4.9m accounted for 83% our expected full year core net loss of RM5.9m. We deem this in line as 4Q17 is seasonally stronger due to increased passenger traffic from festive season.

Deviations

• Broadly in line.

Highlights

• Yoy: 3Q17 core net loss narrowed to RM1.1m from RM1.3m in 3Q16 due to better performance in the catering division (which EBIT has improved to RM4.9m from -RM3.1m in 3Q16) on the back of better cost management and higher passenger traffic.

• Qoq: 3Q17 core net loss narrowed to RM1.1m from RM2m due to better cost management.

• Ytd: 9MFY17 core net loss narrowed to RM4.9m (from RM12.1m a year ago) as the catering division benefited from higher passenger traffic (MAHB reported a 8.1% increase in passenger volume) as well as higher ASP of meals catered to MAB since 3Q16.

• Prospects: MAB’s growth in passenger numbers should bode well for Brahim’s going forward. In view of expected revenue contribution from non-airline catering sector (such as their catering agreement with UKM), we expect catering revenue to increase further. Additionally, we expect the group to continue to increase its kitchen utilization rate by securing further catering partnerships. However, should the group fail to secure a significant catering agreement, we expect it to continue to make losses going forward.

Risks

• Inability to capture new catering agreements.

• Lower than expected tourist arrivals

Forecasts

• Unchanged.

Rating

(HOLD ↔ , TP: RM0.51 ↔ )

• MAB’s gradual turnaround bodes well for group going forward. Nevertheless, we do not expect Brahim’s to turn profitable in the absence of securing a significant catering agreement in the future.

Valuation

• We expect Brahim’s to remain loss making going forward. We maintain our TP of 51 sen based on 0.5x P/B to account for a potential write down of goodwill (which makes up a significant portion of the group’s assets). Maintain HOLD call.

Source: Hong Leong Investment Bank Research - 4 Dec 2017