This article first appeared in The Edge Malaysia Weekly, on December 7 - 13, 2015.

AFTER the sale of Burger King, the San Francisco Coffee (SFC) chain is the next food and beverage asset that Ekuiti Nasional Bhd (Ekuinas) intends to divest.

 “The tender process has started and a few parties, both local and foreign, have expressed interest,” says a source familiar with the matter.

The government-linked private equity fund had acquired a 90% stake in SFC for RM17 million in September 2011, when it also bought a 74% stake in Burger King for RM68.2 million. SFC was the first gourmet coffee franchise to set up shop in Malaysia in 1997. Today, it has 31 outlets in Kuala Lumpur and Selangor.

According to Companies Commission of Malaysia (CCM) data, Ekuinas has a 94.61% in Lyndarahim Ventures Sdn Bhd — the parent company and operator of SFC — while the remaining 5.39% is held by KUB Malaysia Bhd’s group managing director Datuk Abdul Rahim Zin. KUB is also in the F&B business through fast food chain A&W Malaysia.

CCM data shows SFC Sdn Bhd made a net loss of RM3.37 million for the financial year ended Dec 31, 2012, compared with a net profit of RM483,912 a year earlier. It has remained in the red, with a net loss of RM2.13 million and RM4.36 million, respectively, for FY2013 and FY2014.

Meanwhile, parent company Lyndarahim slipped into the red in FY2011 ended Dec 31,  incurring a net loss of RM778,581, compared with a net profit of RM75,925 in FY2011, ended March 31. It has been in the red since then with net losses of RM4.1 million, RM2.1 million and RM4.5 million for FY2012, FY2013 and FY2014 ended Dec 31.

The Burger King business had also been making losses before it was sold by Ekuinas. Its investment in Burger King Malaysia and Singapore was sold to Newscape Capital Sdn Bhd for RM74.6 million in August this year. The divestment had a negative internal rate of return (IRR) of 28.1% and an investment recovery of 0.45 times of capital invested across two funds.

Ekuinas had progressively acquired up to 95% equity interest in the Burger King restaurant business in Malaysia and 100% in the Singapore operation between 2011 and 2012.

Ekuinas’ outgoing CEO Datuk Abdul Rahman Ahmad said in August that the divestment of Burger King had enabled the group to successfully complete the restructuring of its F&B portfolio, involving its exit from the quick service restaurant segment to fully focus on and expand the core casual dining and beverage segments with brands such as San Francisco Coffee, Tony Roma’s, Manhattan Fish Market, New York Steak Shack and Coolblog.

“These F&B brands under Integrated Food Group (IFG) are growing well, with a combined revenue of RM338 million and earnings before interest, tax, depreciation and amortisation (Ebitda) of RM36.5 million, operating through more than 400 outlets across several regions,” he had said then.

Ekuinas posted a gross portfolio return of RM677.1 million for FY2014 ended Dec 31,  which translated into a gross IRR of 19.6% and a net IRR of 15.3% per year.

Ekuinas’ portfolio companies recorded growth of 6.1% in combined revenue, from RM1.4 billion in FY2013 to RM1.5 billion in FY2014. However, in FY2014, the portfolio companies’ consolidated Ebitda was flat at RM401.9 million, as it was largely affected by the performance of the retail F&B and offshore support vessel companies, the group says.

Ekuinas notes that the F&B business has overshadowed the strong performance achieved by the education group, especially APIIT Education Group and Unitar International University, which grew despite the highly competitive tertiary education market. The education segment registered an Ebitda of RM88.7 million in FY2014, up 3.7% from FY2013.

In May, Abdul Rahman said education arm Ilmu Education Group Bhd would be next in line for the firm to realise value creation and this could include a potential listing.

Ekuinas recently announced that Abdul Rahman would retire as CEO when his contract expires in Feb 29 next year. He has been in the driving seat of the group since its inception in 2009. Abdul Rahman will pass the baton to current managing partner (investment) Syed Yasir Arafat Syed Abd Kadir.