Friday, September 2, 2011

Berjaya Food explains BStarbucks RM71.6m price tag

KUALA LUMPUR: Berjaya Food Bhd (BFood) said the proposed acquisition of a 50% stake in Berjaya Starbucks Coffee Company Sdn Bhd (BStarbucks) for RM71.69 million was based on the price-earnings (PE) multiples of 13.5 times.

In its response to queries from Bursa Malaysia Securities Bhd on the corporate exercise, BFood said on Friday, Sept 2'' the PE ratio (PER) was based on the audited profit after tax of BStarbucks for the financial year ended April 30, 2011 of about RM10.62 million and the future growth prospects of BStarbucks.

'The PER of 13.5 times as represented by the purchase consideration is within the range of PERs of 10.7 times to 19.0 times for comparable companies in Malaysia,' it said.

To recap, on Aug 25, BFood announced it was buying 11.50 million shares or 50% stake in BStarbucks from Berjaya Group Bhd (BGroup) ' a unit of BERJAYA CORPORATION BHD [] (BCorp).

To finance the acquisition, BFood said it would be satisfied entirely via cash to be raised from a proposed rights Issue and any shortfall will be funded from its own funds and/or borrowings.

The corporate exercise involved a renounceable rights issue of up to 118.94 million new BFood rights shares with up to 118.94 million new free detachable warrants. This would be on the basis of four rights shares with four free warrants for every five BFood shares held at an issue price of 65 sen per rights share.

In response to the stock exchange's query on BFood's future growth prospects, BFood said the BFood group's core business was the food and beverage industry in Malaysia.

'The business of BStarbucks is complementary to that of BFood's Group, as BStarbucks is in the business of providing quality food and beverage to niche and premium markets, catering towards discerning consumers,' it said.

BFood said BStarbucks had 119 Starbucks stores throughout Malaysia and its revenue had been growing from RM116 million for the FYE April 30, 2009 to RM145 million for FYE April 2011.

It added the company had also turned around from a loss of RM1.1 million in the FYE April 2009 to a profit after tax of RM4.2 million in FYE April 2010 and RM10.6 million in FYE 2011. It added BStarbucks expected the improvement of its revenue and earnings to continue in the future.

On the basis for the issue price of the rights shares of 65 sen per share or the discount of 13.3%, it said this was based on the five-day volume weighted average price of BFood shares up to and including Aug 23 of 81 sen and the theoretical ex-rights price (TERP) of BFood shares of 75 sen.

BFood said the TERP as at Aug 25 was 75 sen (without adjusting for full exercise of warrants), based on the closing price of BFood Shares on Aug 23 of 82.5 se.

'Based on the above, the issue price of 65 sen per rights share represents a discount of approximately RM0.10 or approximately 13.3% to the TERP of BFood shares.

'The board believes the 10 sen or approximately 13.3% discount to the TERP of BFood Shares should be sufficiently attractive to entice shareholders to subscribe for their respective entitlements,' it said.

BFood also said the exercise price of 70 sen for each warrant was based on the five-day average price, the TERP of BFood shares (75 sen) and the prevailing market conditions.

It said the 5.0 sen or 6.7% discount of the warrants exercise price of 70 sen to the TERP of BFood shares of 75 sen would make the proposed rights issue more attractive.

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