Brahim’s signs 5-year new catering agreement with MAS

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KUALA LUMPUR (May 11): Brahim’s Holdings Bhd’s 70%-owned subsidiary Brahim’s Airline Catering Sdn Bhd (BAC) has signed a new catering agreements (NCAs) with newco Malaysia Airline Bhd (MAB), the new entity that takes over Malaysia Airline System Bhd’s (MAS) operations.

In a filing to Bursa Malaysia today, Brahim’s (fundamental: 0.35; valuation:0.9) said the NCAs were in two separate contracts, covering “wide body aircrafts” flights and “narrow body aircrafts” flights, and both shall commence on Sept 1 or such other date as agreed between MAB and BAC in writing.

The NCAs should remain in force for a period of five years, with an additional five years renewal, subject to no breach of any of the key events, which will trigger a termination of the NCA, as well as meeting of critical performance key performance index (KPI)s over the initial five years, and upon mutually-agreed pricing for the extended term of the next five years.

Ibrahim’s said the pricing of the NCAs is based on a competitive pricing methodology for meals and cabin handling, to realise savings and operational efficiencies for both MAB and BAC.

The signing of the NCAs, Brahim’s said, will now allow for a high degree of certainty in BACs business with MAS, and later with MAB as its caterer in the nominated flights, whilst maintaining its position as KLIA principal halal in-flight caterer to the remaining 36 international airlines and other potential new airlines calling on KLIA and Penang.

On the other hand, MAB acknowledged BAC will use the in-flight kitchen in Kuala Lumpur International Airport (KLIA) and Penang International Airport for services to other airlines, and BAC shall ensure it can continue to provide such services to third parties upon the expiration or termination of the NCAs.

The NCA is part of the MAS’ recovery plan announced by Khazanah Nasional Berhad in August last year. The new agreement will terminate BAC’s current 25-years catering agreement expiring in 2028 in KLIA and Penang International Airport.

“The NCAs are expected to contribute positively to the earnings and earnings per share(EPS) of Brahim’s Group for the financial year ending Dec 31, 2015,” said Brahim’s. “The board of directors of Brahim’s is of the opinion that the execution of the NCAs are “in the best interest of the Company.”

However, Brahim’s said in view of the confidentiality clause on certain terms in the agreements, it would not be made available for inspection.

Brahim’s closed 0.5 sen or 0.52% higher at 96.5 sen today, giving it a market capitalisation of RM226.83 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)