Brahim’s Holdings Bhd
(Dec 3, RM1.40)
Maintain fully valued with a target price (TP) of RM 0.90. Brahim’s has entered into a memorandum of understanding (MoU) with Australia-based Carpenter Beef Pty Ltd to jointly develop an abattoir designed to meet China, EU, and US halal requirements. Brahim’s will initially hold a 49% stake, but will raise it to 51% once it is expedient to do so. The certification from the Malaysian Islamic Development Department is crucial for the project to take off.

To be named Cataby Abattoir, the facility will have an annual capacity of 100,000 carcasses with capex estimated to be around A$15 million (RM43.18 million). The project is expected to be operational within six to nine months from investment date. However, the timing on the final investment decision (FID) has not been disclosed. We believe any earnings contribution will only materialise at the earliest in 2016, as it may take a few months for the FID to be made.

This project is a vertical integration for Brahim’s. It will be the major off taker of beef products produced by the abattoir. We believe a large part of it will be used for the group’s internal requirements such as its in-flight kitchen operations. Brahim’s upcoming  pilgrim’s catering project (still under MoU stage) will also require large amounts of beef.

Brahim executive chairman Datuk Seri Ibrahim Ahmad’s privately-owned businesses Dewina Food Industries (ready-to-pack meals) and Desatera (military catering) also require a substantial quantity of beef.

Our TP is based on 16 times financial year 2016 earnings per share. — AllianceDBS Research, Dec 3

This article first appeared in The Edge Financial Daily, on December 4, 2014.