CIMB Research said the corporate exercise will enable it to strengthen its capital base without incurring additional debt or immediate dilution.
PETALING JAYA: Berjaya Food Bhd
’s (BFood) proposed bonus issue of warrants will help it raise fresh capital, but analysts fear it will remain a loss-making company in the near future due to competition and cost pressures.
BFood will issue up to 885.9 million new free warrants on the basis of one warrant for every two shares held.
CIMB Research stated the corporate exercise will enable it to strengthen its capital base without incurring additional debt or immediate dilution.
The warrants will have a tenure of 10 years while the exercise price has yet to be determined.
CIMB Research estimated the full exercise of the warrants could increase BFood’s issued share capital from 1.8 billion shares to approximately 2.7 billion shares, excluding treasury shares (175 million shares; 9.9% of total outstanding shares).
It forecasts this would reduce BFood’s financial year ending June 30, 2026 (FY26) book value per share from 10.7 sen now to 7.1 sen excluding treasury shares or 6.7 sen including treasury shares.
“We expect BFood to remain loss-making over the next three years. Although there are early signs of recovery from the impact of boycotts linked to the Israel-Palestine conflict, weak consumer sentiment and rising operating costs are likely to continue weighing on the company’s earnings recovery,” the research house said.
The exercise price of the warrants could be set at a premium of up to 20% to the five-day volume weighted average market price of BFood shares up to and including the market day immediately preceding the price fixing date.
The proposed bonus issue will be implemented in a single tranche.
The entitlement date will be determined and announced at a later date, after all the relevant approvals have been obtained.
The proposal is expected to be completed by the end of this year. Tan Sri Vincent Tan has a deemed interest of 63.58% in BFood, the research house added.
CIMB Research has maintained its “reduce” call on BFood with an unchanged target price of 28 sen a share, derived based on 2.2 times FY26 price-to-book value and pending further clarity on the proposed warrant exercise and the upcoming FY25 results release on Aug 28.
“Our ‘reduce’ call is premised on the weaker brand equity of Starbucks in Malaysia and intensifying competition within the local food and beverage sector, driven by the rapid expansion of homegrown brands, which could erode BFood’s market share,” the research house said.
