Brahim
KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research sees brighter days ahead for Brahim’s Holdings Bhd fter three consecutive years of losses and cloudy earnings prospects.
It said on Thursday the signing of the “new catering agreement” and entry of strategic partner SATS, positive meals volume outlook amid promising air travel demand coupled with the gradual improvement in non-aviation catering segment, have brightened the earnings outlook for Brahim’s.
HLIB Research expects Brahim’s FY17-19 core earnings to grow by 23% compounded annual growth rate (CAGR) to RM15.2mil.
It maintained a Trading Buy rating on Brahim’s with a 98 sen target price (or 28% upside), deriving from a 16 times FY18 EPS of 6.1sen, representing a 27% discount to SATS (owns a 49% stake in Brahims Catering) FY18 PE of 22 times.
Near term re-rating catalysts are securing the Rapid catering contract and kitchen facility rental waiver (not imputed in HLIB Research FY17 forecasts), which management guided to materialise in 2H17.
“Assuming Brahim’s secures both deals, we estimate FY17 profit after tax and minority interest to be boosted by 117% to RM21.5mil or 9.1 sen a share (from 4.2 sen),” it said.
After tumbling 40% from 52-week high of RM1.07 (May 24, 2016) to a low of 64.5 (Jan 4, 2017), Brahims’ share prices staged a relief rally as high as 87.5 sen (Feb 14) before retracing to 76.5 sen on Wednesday.
“Technically, its short and long-term outlook remains encouraging as uptrend support trend lines remain intact and we believe the stock is ripe for a near term downtrend resistance breakout, as indicators are on the mend.
“A decisive breakout above daily downtrend line near 78 sen may spur share prices higher towards 83 sen (200-day SMA) and 87.5 sen, before testing our LT objective at 94.5 sen (Aug 9 high).
“On the flip side, key supports are situated at 72.5 sen (50-d SMA) and 70 sen psychological support. Cut loss at 69 sen,” it said.
