'Compelling regional growth' for Maybank

The acquisition of Singapore's banking franchise, Kim Eng Holdings, and the longer-term growth potential of Bank Internasional Indonesia (BII), will set the stage for a potentially compelling regional growth for Malayan Banking Bank Bhd (Maybank).

OSK Research said the bank's latest quarter net profit year-on-year (y-o-y) growth of 25.1 per cent and quarter-on-quarter growth of 11.4 per cent, respectively, far outpaced the industry's aggregate of 15.6 per cent and 8.2 per cent, respectively.

"Its earnings were propelled by an industry-beating loans growth of 17.6 per cent, y-o-y, the hefty 62.1 per cent drop in loans loss provision and maiden contribution from Kim Eng," OSK Research said in a note today.

It said BII was also aggressively expanding via new hiring and enlarging its branch network by 43 per cent over the next one-and-a-half years.

The research firm said BII's operating leverage would begin to flow through by financial year 2012 and financial year 2013 on a more stable cost base while generate new revenue from its enlarged presence.

"This would naturally help bring down the cost-to-income ratio closer to the industry average, driven largely by revenue growth from its enhanced infrastructure investments, as costs stabilises," it said.

OSK Research is maintaining a "Buy" call and fair value of RM9.60 on Maybank given the qualities provided by the bank and its alluring 7.6 per cent dividend yield which is the highest among domestic banking stocks. -- Bernama

QSR, KFC get takeover offers

CVC Capital Partners Ltd teamed up with Johor Corp to make buyout offers today for KFC Holdings (Malaysia) Bhd and parent QSR Brands Bhd, which operate more than 900 fast-food outlets in Southeast Asia and India for brands including KFC and Pizza Hut. London-based buyout specialist CVC and Johor Corp, an investment arm of Malaysia’s Johor state government, offered RM4 per share for KFC Malaysia and RM6.80 per share for QSR, according to separate filings to the Kuala Lumpur stock exchange today. -- Bloomberg

============

Thanks to god, this is my forth luck this year, first mamee, then Permanis, then SP Setia-WB and now KFC.

KFC Holdings

Bought KFC @ RM3.35. Banking on India growth and stability of local demand.

Bought Myeg

Disposed Axiata @ RM4.90, bought Myeg @ RM0.61 today.

The Band Perry - If I Die Young

Gallo Says Undersubscribed German Auction Is `Ominous'

Part 1 - Buffett Buying IBM [NBC 11-14-2011]

The Edge Billion Ringgit Club - Fraser & Neave Holdings Bhd

Written by Financial Daily

Tuesday, 15 November 2011 11:31

Fraser & Neave group is a household beverages and dairies name that has been present in Malaysia since 1883.

In 1972, the Frase & Neave Ltd group ventured into glass manufacturing via acquisition of a substantial stake in Malaya Glass Bhd (MGB). In 1996, the group reorganised and realigned its Malaysian soft drinks and dairy businesses by injecting them into MGB, which later changed its name to Fraser & Neave Holdings (F&N) on March 5, 1996.

Since then, F&N has been regarded as the food and beverage (F&B) arm of its parent, Fraser & Neave, with wholly owned core businesses in Malaysia in soft drinks and dairies.

The group’s soft drink brands include 100Plus, F&N Fun Flavours, Seasons, Fruit Tree, Ice Mountain and Red Bull, while it is a franchise holder for Coca-Cola, Sprite and Aquarius. Its dairy brands include F&N, Tea Pot, Gold Coin, Farmhouse, Magnolia and Alive. It is also a franchise holder for brands such as Sunkist, Ideal, Carnation and Milkmaid.

F&N’s soft drinks factory in Shah Alam, operational since 1996, is one of the largest in Southeast Asia. The condensed milk factory in Petaling Jaya, set up in 1969, is Southeast Asia’s largest with an annual capacity of over 11 million cases. It also operates a can-making plant with a capacity of more than 420 million cans per annum.

A property division was added in 2004 and the group purchased a stake in Cocoaland Holdings Bhd in 2010 to further strengthen and accelerate the development of food products in its existing regional F&B portfolio. In 2010, the glass business was divested.

Datuk Ng Jui Sia, F&N CEO/managing director shares with The Edge Financial Daily his strategies and dreams for the company.

TEFD: What are the group’s competitive strengths and advantages?

Ng wants to see F&N establish itself as a leading regional F&B company.

Ng: Our competitive strengths lie in our people capability, established brands, a comprehensive distribution infrastructure and manufacturing excellence.

With a 128-year heritage, the F&N group in Malaysia has built a wealth of experience and established a legacy with distinctive embedded values. With intimate knowledge of the local market and consumer needs, we have managed to meet those needs for over four generations of Malaysians through product innovation. At the same time, we have built our distribution network to be second to none. F&N brands can be found in any distribution channel, ranging from hypermarket to sundry shops, from road side stalls to high-end F&B outlets.

Surveys have shown that virtually every household pantry and almost every F&B outlet in Malaysia stocks one or more of our products. Indeed, over the past 128 years our brands have become synonymous with the culture and traditions of Malaysia. Our products are affordable staples that are consumed nationally on a daily basis (and especially during Malaysia’s numerous festive seasons) and predominate in the market sectors in which we compete. For these reasons F&N is regarded as a good barometer of consumer confidence and of the national economy.

What have been the achievements of the group in the past four years?
The most significant achievement was Nestle’s canned milk acquisition in 2007. The acquisition propelled F&N into the largest canned milk producer in Southeast Asia. This was a very strategic investment as it enabled F&N to set a foothold in Thailand and a launch pad for expansion into the largely untapped Indochina and Myanmar markets with a population base of over 200 million. Its presence in the Thai market has helped F&N transform almost overnight into a top five non-alcoholic F&B company in Thailand, contributing to over RM1 billion revenue, next to the dairy business.

In 2009, a RM250 million Greenfield liquid milk plant was established in Rojana, 70km north of Bangkok with a total capacity of 3.5 million cans per day or annual production of 24 million cases of products. The plant is fully integrated with outsourced in-situ can manufacturing facility and on-site logistics operations.

The Thai plant became a blueprint for F&N Dairies Malaysia’s new RM350 million plant at the Pulau Indah halal hub in Selangor which is scheduled for completion in the second half of this year. This plant will showcase cutting-edge green technology which minimises carbon footprint via the incorporation of water, energy and environmental conservation technology.

Over the past five years since January 2006, the market capitalisation of F&N has seen a nearly threefold increase from RM2.21 billion to RM6.27 billion as at mid-October 2011.

What are the major challenges your company faced over the years and how did it overcome them? Is there anything else you would have done differently?
Our raw materials purchases are in US dollars. Thus, volatility in the USD/MYR exchange rate will have an impact. We will monitor our currency movements closely.

How is the company positioning itself within your industry? What are your strategies to grow or gain market share?
We are the market leaders in the ready-to-drink (RTD) beverages and canned milk (sweetened condensed milk and evaporated milk) in Malaysia. Our aim is to reinforce this leading position, while expanding our product portfolio towards becoming a total F&B company.

We are making fast and positive inroads into Thailand markets, and establishing a strong brand visibility in Indochina and Myanmar.

We have a two-pronged strategy for expansion. The first is to grow the business organically in the domestic markets that we operate in and seek new ones through exports, while the second is to seek out acquisition opportunities and/or strategic alliances with F&B entities, which will complement and synergise with our existing business model.

The F&N group is also able to leverage on the trained expertise from Nestle in terms of technical capability and R&D resources which have resulted in the introduction of innovative products to the market.

We will continue to launch more products and variants in addition to strengthening the distribution infrastructure of our remaining core products in the country. Our sound balance sheet coupled with strong liquidity will stand us in good stead as we pursue our vision of becoming a regional F&B company.

What are the group’s plans for the future, both short-term and long-term? What are your group plans to compete in the increasingly globalised environment?
With Coca-Cola’s impending entry, we expect the local beverage landscape to change and competition to intensify, both of which will pose challenges as well as provide new opportunities to the group. Noise levels (in terms of advertisement, promotions, merchandising, new product launches) will increase significantly with the entry of such a formidable player. Arising from this, we expect the RTD market to expand.

Presently F&N has a leading advantage in terms of width and depth of distribution and our brands like 100Plus, F&N, Seasons are household names. F&N will vigorously contest to reinforce our position in the market. After all, Malaysia is our home ground and we are homegrown. We expect F&N volume to continue to grow by double digits in the foreseeable future.

As for dairies, we have started the ball rolling by entering the Thai dairy market in 2007. The immediate focus is to grow share in the Thai market and build brand franchise and presence in Myanmar and the Indochina region.

Once there is a critical mass, it offers an opportunity to set up dairy plants in Indochina and Myanmar to cater to the growing demand as the Rojana plant in Thailand will not be able to fulfil demand of a 220-million population base.

How would you like to see the group in 10 years’ time?
We would like to see F&N establishing itself as a leading regional F&B company, with dairy and soft drink plants in the Asean region, particularly in Myanmar and Indochina.

QSR’s Tom Yum Crunch spices up a busy 4Q

Written by Financial Daily

Tuesday, 08 November 2011 10:29

QSR Brands Bhd
(Nov 4, RM5.65)
Maintain outperform with revised target price of RM8.30 from RM7.22: Crowd favourite Tom Yum Crunch returns after seven years to a hot and spicy response, feeding into KFC’s mouth-watering same-store sales growth (SSSG) 0f 12% in October. Pizza Hut is playing catch-up in the delivery segment and the group is making further headway in India.

We raise our target price as we roll it forward, still pegged to 17.8 times forward price earnings ratio (PER), the average valuation of bigger peers. A further rise in average ticket prices, success in new markets and accelerated share buyback underpin our “outperform” call.

We are confident that Tom Yum Crunch will enable QSR to meet our FY11 SSSG target of 5% for both Pizza Hut and KFC. This will be the group’s best SSSG performance since FY09. We wasted no time in joining the queue at a KFC restaurant to welcome the return of Tom Yum Crunch.

During its debut in 2Q04, the wonder product helped KFC’s quarterly SSSG hit an unprecedented 44%. Just like the first round, the product did not disappoint and has generated a lot of buzz, contributing to KFC’s 12% SSSG in October. We applaud QSR’s latest initiative to drive Pizza Hut’s transactions across the delivery segment where it is lagging behind Domino’s. QSR has rolled out a new type of dough and a new distribution channel called Pizza Hut Delivery (PHD). PHD guarantees delivery within 30 minutes for 5km-radius catchment areas and offers free delivery and net prices to compete more effectively with Domino’s. We are encouraged by KFC India’s progress so far.

Monthly sales average RM350,000 to RM400,000 per outlet, substantially higher than the average of RM270,000 per outlet recorded by KFC Malaysia’s operations. A wide array of products that cater for vegetarians and non-vegetarians is bringing in the traffic and a staggering SSSG of 20%. Similar to the Malaysian operations, the average ticket price has been on the uptrend, hitting RM14 in 2Q11 compared with RM13.50 in 1Q11 and RM12 in 4Q10. — CIMB IB Research, Nov 4

The Edge Billion Ringgit Club - Mah Sing Group Bhd

Written by Financial Daily

Tuesday, 01 November 2011 11:37

Incorporated in 1991, Mah Sing Group Bhd is one of Malaysia’s leading developers. With numerous international and domestic awards, the group has established a strong brand in medium to high-end landed residential properties, commercial projects including office buildings, shops, retail and SoHo as well as industrial projects. It also has a profitable plastic business, which was the original core business of the group before it diversified into property development. The group has about 34 projects across Malaysia.

Group managing director and CEO Tan Sri Leong Hoy Kum shares with The Edge Financial Daily his strategies and dreams for the company.

TEFD: What are the group’s competitive strengths and advantages?
Leong: Our competitive strengths include being versatile, having a strong brand, being innovative and being able to cater for various market segments.
• Versatility. Mah Sing is one of the few developers in Malaysia to offer a wide range of products comprising residential (catering for a wide range of customers, from medium to high-end developments, both landed and high-rise with built-up areas from 500 square feet), commercial (office, retail and shops) and industrial properties. Our wide ranging product offerings help the group identify and roll out different products in different phases of the economic cycle (see table).
• Quick turnaround strategy. The group ensures a short period between land purchases and launches for fast cash flow generation to maximise shareholders’ return.
• Strong research and development team. We conduct in-depth study of market needs. The team is able to identify new trends that appeal to the market. For instance, in the residential segment, we identified the trend and appeal of superlink, semi-detached and bungalow developments in a gated-and-guarded environment with facilities. In the commercial space, we popularise en bloc sales in the primary market (The Icon Jalan Tun Razak — West Wing and East Wing, and Apex Tower, Southgate). For the industrial segment, the group identified the opportunity for niche semi-detached industrial properties in the Klang Valley which resulted in the brisk sales for our iParc 1, 2 and 3
• Strong branding. The group has built a strong brand name over the years, delivering quality products on a timely basis that meet the needs of end buyers.

Leong is inpired by Li Ka Shing and aims to make Mah Sing the Cheung Kong of Malaysia one day.

• Innovative and fresh concepts, adaptable to changing market demands. Our product development team continuously work on innovative products based on market feedback obtained by our research and development team. While presenting fresh concepts, we ensure that practicality is given paramount importance.
• Quality and services. Mah Sing has a strong quality control and quality assurance team that ensures all our projects meet and exceed stringent quality standards. We are also adopting international best practices in ensuring quality and have sought CONQUAS (Construction Quality Assessment System) certification by BCA Singapore (Building and Construction Authority) for all new residential projects. We also have the distinction of being the first and only developer accorded the CONQUAS award for an office building in Malaysia, namely The Icon Tun Razak which was completed in 2009.
• Strong balance sheet and earnings sustainability. We had low net gearing of 0.32 times as at March 31, 2011. This provides us with the capacity to gear up for landbanking. Our present combined remaining gross development value and unbilled sales are about RM14 billion which should provide earnings sustainability for another five to seven years.
• Geographical diversification. Domestically, Mah Sing has developments in the three main growth corridors of the Klang Valley, Johor and Penang. It is also looking at opportunities abroad in China, Vietnam, Singapore and Australia.


What are the group’s achievements in the past four years?
Our revenue doubled from RM573 million in 2007 to RM1.11 billion in 2010, while net profit increased nearly 50% from RM81 million in 2007 to RM118 million in 2010. Our number of projects nearly tripled, from 13 projects in 2007 to 34 in 2011. We have maintained a consistent dividend payout of a minimum of 40% of net profit since 2006. Mah Sing has garnered both local and international awards and accolades for its projects as well as recognition for its performance as a leading property developer.

How is the group positioning itself within your industry? What are your strategies to grow or gain market share?
Mah Sing is a premier lifestyle developer and our expertise is in innovative product development, high quality finishing and timely delivery of products that surpass our buyers’ expectations. We are also one of the very few developers in the country to offer a full and complete range of properties, namely residential, commercial and industrial products. Hence, we are positioning ourselves as a one-stop centre where properties are concerned.

We will continue to offer properties in good locations, with concepts and designs that meet buyers’ needs. In 2007, we achieved sales of RM727 million and doubled that to RM1.5 billion in 2010. Moving forward, we aim to gain more market share, starting with a RM2 billion sales target for 2011.

We are committed to raising the bar to continuously improve our concepts, designs and also strive to create iconic buildings and developments. We will also continue to run our business well, grow our revenues, profits and returns to shareholders, as well as adopt good corporate governance.

What are the group’s plans for the future?
In the coming years, the group will proceed with its three-pronged strategy. We will continue with our niche, quick turnaround development model for our residential, commercial and industrial series as it is profitable and cash-generative. With our low net gearing, we target to acquire a large tract of strategic land bank over the next two years. In the future, we shall explore overseas expansion to drive future earnings growth.

What is your dream for your company? How would you like to see it in 10 years?
My vision is to be a regional developer. We would like to continue with our branding locally and hopefully someday, our brand will penetrate other parts of the world. This is what we wish for as we are looking at bringing value to the house buyers, improving the quality of life and enhancing their lifestyles. We are a dynamic company and seek continuous improvement. Ultimately, we want to leave a legacy of excellence.

I am inspired by business luminaries like Li Ka Shing and aim to make Mah Sing the Cheung Kong of Malaysia one day.

Axiata 6888

Bought Axiata at RM4.83/share today.

Haydi Öp (Keremcem)

My fav turkish singer

NTPM hit by rising costs

KUALA LUMPUR: A market leader in tissue products, NTPM Holdings Bhd is concerned about the rising costs of its main raw materials, recycled paper and pulp, but has decided not to pass down the cost increases to consumers.

In an email interview with The Edge Financial Daily, NTPM’s managing director Lee See Jin explained: “NTPM has to be socially responsible not to pass on the cost increase to the consumers each time there is a hike in the material and operational costs. The consumer is already burdened by the increase in daily living costs such as petrol and electricity.”

Pulp and recycled paper constitute 30% of NTPM’s cost of sales, he said.

The prices of recycled paper and pulp have been increasing by an average of 45% and 33% respectively over the last two years and this had an impact on NTPM’s profitability in its previous financial year ended April (FY11).

For its first quarter (1Q) ended July 31, NTPM posted a 13.2% year-on-year rise in revenue to RM106.95 million from RM94.5 million a year ago.

But due to the increase in raw materials cost and production overheads, its net profit fell by 25.6% to RM9.23 million from RM12.41 million previously.

Asked if NTPM is compromising its shareholder value by not passing down the cost increases to consumers, Lee said: “It all depends on the situation, that is, market forces and the competitors’ market position. Increasing our selling price will improve our profitability in the short term.

Lee said NTPM will continue to find ways to mitigate the impact of higher costs by continuing to improve its business operations and looking for avenues to bring down energy costs.

“However, using this strategy may result in some cost conscious customers seeking cheaper alternatives. Hence, we may lose some market share in the future.”

He said there should not be any price increment in NTPM’s products for now.

On the strategies against rising raw material prices, Lee said NTPM will continue to find ways to mitigate the impact of higher costs by continuing to improve its business operations and looking for avenues to bring down energy costs.

Electricity accounts for about 8.5% of NTPM’s cost of sales.

For 1QFY12, NTPM derived 80% of its revenue from tissue products such as facial tissue (19%), toilet rolls (33%), kitchen towels (6%), serviettes (5%) and jumbo rolls (8%).

The balance 20% came from personal care products such as facial cotton (3%), sanitary napkins (7%), baby diapers (9%) and adult diapers (1%).

NTPM’s Premier and Royal Gold brands are the top two market leaders in the facial tissue segment with a market share of 38.3% and 9% respectively.

Its Cutie brand is also the market leader in the toilet tissue segment with 48.5% market share.

Its Diapex brand in the baby diaper segment and Intimate brand in the sanitary napkins segment have a market share of 4% and 6.1% respectively.

Lee said the information for its products’ market share was extracted from ACNielsen’s market report for 2010. But the current market share for these products should not differ much, he said.

According to Lee, NTPM’s major competitors are Kimberly-Clark, Uni-Charm, SCA and DSG (Thailand).

Sales of NTPM’s baby diaper products have been growing rapidly with a 78% increase in FY11.

Lee said NTPM targets to achieve a market share of 10% to 20% for baby diapers in the future, which translates into sales of RM100,000 to RM200,000 per annum.

“We expect the contribution from baby diapers to be 5% to 10% of our total revenue,” he said.

On the introduction of new products, Lee said the company is interested in wet wipes and its inclusion will provide a comprehensive answer to the range of personal care products NTPM currently owns.

To increase market share and stay ahead of competitors, NTPM will focus on growth by expanding its product portfolio and introducing new innovative products, he said.

“NTPM will continue to enhance its distribution network in the country, which is one of the group’s core competencies, and strengthen its foothold on its higher value-added products range,” he added.

He said NTPM will also beef up its presence in established markets such as Malaysia and Singapore, and seek opportunities in Southeast Asia and the Oceania region.

For 1QFY12, most of its revenue came from Malaysia (67%). Other revenue contributors include Singapore (15%), Australia (5%), Thailand (3%), South Africa (3%), USA (2.1%), New Zealand (1.5%) and Brunei (1%).

In July, NTPM, through a wholly owned subsidiary, NTPM Paper Mill (Bentong) Sdn Bhd, had proposed to acquire land and machinery from Union Paper Industries Sdn Bhd for RM20 million.

Lee said Union Paper has two paper-making machines with a capacity of 30 tonnes per day. The machines are meant to produce “high runner” toilet rolls and facial tissue products.

The acquisition is expected to be completed by April 2012 and NTPM Paper Mill is expected to contribute to NTPM’s earnings from FY13 onwards, said Lee.

Currently, NTPM has 18 paper-making machines with a total capacity of 255 tonnes per day. NTPM is currently operating at 80% capacity.

For its personal care products, NTPM has two production lines for baby diapers and six machines for sanitary napkins. Both operations are currently operating at 50% capacity.

On the industry’s outlook, Lee foresees the market growth for NTPM’s products over the next year or two possibly moderating due to inflationary pressures on consumer spending power and waning consumer confidence.

“At the same time, we are feeling the pinch of intense competition from other market players.

“However, we are optimistic that we shall continue to do well and thrive in the years ahead mainly due to Asia’s robust growth led by its strong domestic demand,” he said.

Since its listing in 2003 until FY11, NTPM has chalked up compound annual growth rates for revenue and net profit of about 11% and 8% respectively.

For FY11, it registered revenue of RM420.23 million, an increase of 9.7% from RM383.12 million for FY10.

Despite the higher revenue, its net profit declined 12.2% to RM52.06 million from RM59.32 million previously, due to the increase in raw material prices.

NTPM has a market capitalisation of RM555.98 million at its closing price of 49.5 sen last Friday. Its stock has fallen 11.61% year-to-date and has traded between a 52-week high of 58 sen and a low of 46 sen.

As at July 31, NTPM had cash reserves of RM20.75 million and total borrowings of RM75.8 million.

For FY11, it paid a total net dividend per share of 2.9 sen which represented a payout ratio of 62.56%. Its dividend yield was 5.86% based on its last traded price.

In a Sept 26 report, OSK Research downgraded NTPM to a “sell” with a fair value of 46 sen from 53 sen previously.

OSK Research said NTPM posted poorer than expected results in 1QFY12 as margins were impacted from gas and electricity price hikes, higher raw material prices, and higher indirect raw material such as chemical and packaging prices.

However, it stated that if the global economic conditions worsen, the potential decline in pulp prices would augur well for NTPM.

Raising some cash

Took some (30%) profit on my Mahsing @ RM1.80. Holding too much property stock make me nervous looking at current uncertainty. Well, there's nothing new and exciting news from europe, thus, its better for me stay in sideline.

BNP, Societe Generale Say French Report They May Raise Capital Is False Q

By Francois de Beaupuy - Oct 9, 2011 11:00 PM GMT+0900

BNP Paribas (BNP) SA, France’s largest bank, and Societe Generale SA denied a report in today’s Le Journal du Dimanche that they may seek to raise billions of euros to shore up their capital as part of a Europe-wide plan.

“BNP Paribas is denying this report, and is confirming that it plans to reach a Tier 1 capital ratio of 9 percent,” complying with Basel III rules “by the start of 2013, six years before the deadline, without a capital increase,” spokeswoman Carine Lauru said in a telephone interview today.

Societe Generale also “denies the report” and confirmed its strategic plan to reach a Tier 1 ratio of “well above 9 percent by the end of 2013 without a capital increase,” Laetitia Maurel, a spokeswoman for the Paris-based bank, said in an email statement.

Le Journal du Dimanche today reported that BNP Paribas and Societe Generale (GLE) may seek to raise 7 billion euros ($9.4 billion) and up to 4 billion euros respectively as part of a Europe-wide plan to be discussed between France and Germany to shore up the region’s banking system. The French newspaper didn’t say where it obtained the information.

Paris-based BNP Paribas and Societe Generale, France’s second-largest bank, said last month they were taking steps to assuage investors’ fears and reduce their need for U.S. dollar funding.

Balance Sheet Cuts

BNP Paribas is planning to reach a Tier 1 capital ratio, a measure of financial strength, of 9 percent by the start of 2013 through measures including cutting its corporate- and investment-banking balance sheet by $82 billion, according to a Sept. 14 presentation.

German Chancellor Angela Merkel and French President Nicolas Sarkozy, who are meeting today, will set a timeframe to reach equity goals in coming weeks because a signal must be given to reassure markets, Le Journal du Dimanche said, citing an unidentified person close to Sarkozy.

Banks will have to seek funds from private investors, according to the newspaper. If they fail to find private investors, governments or the European Union will take stakes in banks, it said.

Taylor Swift - Mean

Always love Taylor Swift.

BFood on expansion spree

I really like this counter, looking for the right time to buy in. Injection 50% of Berjaya Starbuck asset under Berjaya Foods definitely will offer a better growth opportunity rather than just relying on KRR. Its a good brand but i dont really feel like KRR has a ummph factor to drive customer to their restaurant frequently like KFC or McD.

Now, with Starbucks under BJFood umbrella, will give us opportunity to participate Starbucks' growth potential. Clean balance sheet, good business model and future growth through restaurant expansion and potential of enjection of other Berjaya asset such as Krispy Kreme and Wendy's

==============================================

KUALA LUMPUR: Berjaya Food Bhd (BFood) is showing promising growth prospects with the injection of Berjaya Starbucks Coffee Co Sdn Bhd into its business and the plan to expand its chain of Kenny Rogers Roasters (KRR) restaurants in Malaysia and Indonesia.

BGroup, which holds the global KRR franchise via wholly-owned Roasters Asia Pacific (HK) Ltd, is venturing into China.

BFood, on the other hand, is principally involved in the development and operations of KRR in Malaysia through wholly-owned Berjaya Roasters (M) Sdn Bhd, the franchise holder of KRR restaurants in Malaysia.

Listed on Bursa Malaysia in March, BFood’s FY11 net profit was up by 17% to RM10.2 million from RM8.68 million in FY10. Revenue grew by 19% to RM71.9 million from RM60.42 in FY10.

In a recent interview with The Edge Financial Daily, BFood CEO Datuk Francis Lee expected the company’s revenue and net profit for FY12 ending April 30 to grow at the same pace as in the previous year.

BFood’s earnings for FY13 onwards will get a boost from the ongoing acquisition of Berjaya Starbucks, which will be concluded in the first quarter of 2012, said Lee, a former director of Berjaya Starbucks.

Last month, BFood proposed to buy a 50% stake in Berjaya Starbucks from BGroup for RM71.69 million cash or at a price-to-earnings ratio (PER) of 13.5 times.

The acquisition will be financed by a proposed cash call to raise over RM70 million. The proposed rights issue is on the basis of four rights shares together with four free warrants for every five existing shares held at an issue price of 65 sen per share.

Kenny Rogers Roasters at Aeon Bandaraya Melaka shopping centre.

Berjaya Starbucks, for its FY11 ended April 30, recorded a net profit and revenue of RM10.62 million and RM145 million respectively.

When asked if the acquisition of Berjaya Starbucks at a PER of 13.5 is expensive, Lee’s response was: “At 13.5 times, I think it’s a fair value because of the visibility of Starbucks in the whole of Malaysia. It will propel BFood to a different level.”

“If you look at Starbucks Corporation (listed on Nasdaq) itself, it has a PER of 26 times,” he added.

However, Lee declined to give details of Berjaya Starbucks’s expected future earnings. He only revealed that Berjaya Starbucks same-store sales growth has been about 15%.

According to Lee, BFood is targeting to open 12 to 15 Starbucks outlets every year.

“With 120 outlets currently, Berjaya Starbucks’ store growth would be about 12%,” he said, adding that BFood plans to have 200 outlets over the next five years.

Lee said a master development agreement with Starbucks Corporation was in the process of being re-signed and should be concluded within two months.

The new agreement will allow Berjaya Starbucks to run its franchises for 20 years compared with 10 years previously.

Going forward, Lee said Starbucks would always be the preferred brand in Malaysia.

“Starbucks will be the first port of call when it comes to any mall or premises that is ready to be occupied because of its unique position and strength, US backing, product development and marketing tools,” he said.

On BFood’s expansion into Indonesia, Lee said in about two weeks, it would complete a deal allowing BFood to develop and operate the KRR franchise in Indonesia.

In late July, BFood entered into a joint venture with PT Mitra Samaya, PT Harapan Swasti Sentosa and PT Boga Lestari Sentosa to develop and operate the KRR franchise in Indonesia under PT Boga.

Under the deal, BFood will pay RM1.91 million for a 51% equity stake in PT Boga. On top of that, BFood will extend a RM6.09 million loan to the Indonesia-based company and will subscribe to the rights issue of PT Boga that will cost about RM1.99 million. BFood is granted an option to raise its shareholding to 70% within seven years.

PT Boga has four KRR restaurants in major shopping malls in Jakarta.

In addition to the four restaurants in Indonesia, Lee said PT Boga will open another five by the end of this year, and another three more by end-June 2012. In total, there will be 12 stores by end-June 2012.

Lee expects the KRR restaurants in Indonesia to break even by April 2012 and contribute to BFood’s earnings in FY13.

“The following financial year-end should have some positive growth in terms of bottom-line numbers,” he said.

Lee emphasised the potential of BFood’s business in Jakarta, the most populous city in Southeast Asia, with a population of over 20 million.

After opening 20 to 25 KRR restaurants in Jakarta, BFood will also look at other places in Indonesia, Lee said.

Within the next five years, he expects a total of 60 to 70 KRR restaurants to be in Indonesia.

Lee said Indonesia will be the company’s focus for the moment but other potential countries will include India, Taiwan, Vietnam and Thailand.

In Malaysia, there are currently 68 KRR restaurants — 55 BFood-owned and 13 franchised restaurants. BFood plans to open another 15 KRR restaurants in FY12, Lee said.

While BFood’s focus will be mostly in Southeast Asia for the moment, BCorp will be the vehicle for the KRR franchise venture in China.

In April, Lee had set up a team in Shenzhen, China, and said BCorp would open its first KRR restaurant there in the first week of November.

The restaurant will be located in Shenzhen Link City Underground Shopping Mall in Futian district. The unique underground mall is linked to an underground mass rapid transit, he said.

“It’s on the border of Kowloon and China, so there is a lot of traffic and people passing through,” he said.

Lee said BCorp has set up five stores in China and is under negotiation to open another 20.

BFood may inject other food and beverage (F&B) brands held under BGroup such as Papa John’s Pizza, Wendy’s Restaurants and Krispy Kreme Doughnuts.

“When the other franchises [under BGroup] are ready [in terms of earnings] there may be a possibility of injecting them into BFood,” he said.

“The idea is to hold BFood as the preferred route to hold all of our group’s F&B businesses,” he added.

Lee said BFood will look to buy other F&B businesses at low PERs to add value to the company. “BFood’s growth can be organic and also through external acquisitions,” he said.

To ensure a high success rate for its KRR operations, Lee said BCorp consults focus groups.

Based on the focus groups’ findings, Lee said they will tweak the KRR menu to better suit the food taste of different countries. For instance, people in China prefer a slightly sweeter sauce, whereas in Indonesia, a slightly saltier or spicier sauce is preferred.

However, KRR restaurants worldwide will maintain their signature products and sauces, he said.

KRR has redesigned its restaurants to create a modern and contemporary ambience, Lee said.

The KRR logo has been changed, too. The face of Kenny Rogers, country musician and co-founder of KRR, has been replaced with a flame and the new overall logo has more aggressive colours, Lee said.

“The younger generation does not know who Kenny Rogers is,” he explained.

Lee said BFood has streamlined the KRR menu to increased gross profit margins. He added that the average spending in Malaysian KRR restaurants is about RM45.

KRR’s competitors are table service restaurants in the mid-casual segment such as Pizza Hut, which has a similar ambience to KRR restaurants, he said. He clarified that KRR is not a fast food business.

To ensure KRR’s quality is maintained while the business is expanding, Lee said an important criteria is to keep recruiting and training employees.

Not known to many, Lee said KRR and Berjaya Starbucks have a mobile restaurant capable of serving up to 200 guests.

“If you can have the Starbucks and KRR van together at an event, it will be a unique experience,” said Lee, who holds such an event at his home once a year.

Financially, BFood has a sound balance sheet with cash reserves of RM31.29 million with no borrowings as at end-July.

Lee said the cash reserves will be used to open more stores and pay dividends.

BFood paid its first interim dividend of three sen in FY11 amounting to RM4.26 million, which translates into a payout ratio of 41.8%.

Based on its closing price last Friday at 84 sen, BFood has a dividend yield of 3.6%.

Since its maiden trading day on March 8, BFood’s share price has climbed 65% to 84 sen from its issue price of 51 sen.

According to Bloomberg data, BFood has a PER of 11.65 and market capitalisation of RM119 million. As a comparison, KFC Holdings (M) Bhd has a PER of 16.43 and market capitalisation of RM2.62 billion, while QSR Brands Bhd has a PER of 13.36 and market capitalisation of RM1.62 billion.

The other F&B stock listed this year, Oldtown Bhd, has a PER of 7.74 and market capitalisation of RM303.6 million.

Lee said BFood’s market capitalisation of RM119 million gives it much potential to grow compared with KFCH and QSR.

Buffett Says Berkshire Made $4 Billion of Stock Investments During Quarter

By Andrew Frye and Charles Mead - Oct 1, 2011 1:57 AM GMT+0900

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Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., center, attends a ceremony with Cathy Baron Tamraz, chief executive officer of Business Wire, left, to ring the opening bell at the New York Stock Exchange (NYSE) in New York on Sept. 30, 2011. Photographer: Scott Eells/Bloomberg

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Sept. 30 (Bloomberg) -- Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., talks about his proposal for increasing taxes on ultra-rich Americans, and the European debt crisis. Buffett, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses Berkshire's investment in Bank of America Corp. and share buyback program. Cathy Baron Tamraz, chief executive officer of Berkshire's Business Wire unit, also speaks. (Source: Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) added about $4 billion in common stock to its investments during the third quarter, taking advantage of undervalued equities as stock markets slid.

The net change, described by Buffett today in a Bloomberg Television interview, compares with $3.4 billion in the second quarter. That was the most since Omaha, Nebraska-based Berkshire plowed a net $3.6 billion into stocks during the third quarter of 2008, the height of the global credit crisis.

“We’re ready to buy lots of things,” Buffett, 81, said in the interview with Betty Liu on the floor of the New York Stock Exchange. Berkshire’s program to purchase its own stock, announced earlier this week, “won’t keep us from investing billions and billions and billions in plants and equipment, in new acquisitions.”

Berkshire, which had a $67.6 billion equity portfolio as of June 30, is focusing on stocks after its cash hoard swelled and interest rates remained near record lows. Equities markets around the world fell during the third quarter amid speculation that Europe will fail to contain its sovereign debt crisis and that the U.S. economy will weaken.

Earnings from Berkshire’s businesses have grown to about $1 billion a month, and finding uses for that cash has become more difficult, Buffett said in April. The Standard & Poor’s 500 Index dropped 12 percent from the end of June through yesterday, heading for the worst quarterly performance since the last three months of 2008, while the Stoxx 600 Europe Index tumbled 16 percent.

Buying When ‘Cheap’

Buffett, the company’s chairman and chief executive officer, excluded the firm’s $5 billion purchase of Bank of America Corp. (BAC)’s preferred stock from his $4 billion estimate for common-stock investments. The deal with the Charlotte, North Carolina-based lender pays $300 million in annual dividends and gave Berkshire warrants to purchase 700 million shares of common stock for $7.14 each.

Berkshire, which has shunned buybacks for four decades, said Sept. 26 that it will repurchase shares for as much as 110 percent of their book value because the stock is undervalued. The firm has since started procuring them.

Its Class A shares had slipped below $100,000 in New York Stock Exchange composite trading on Sept. 22 for the first time since January 2009. They traded at $108,400 as of 11:43 a.m. today.

“If the stock is cheap, we will buy it,” Buffett said. “If it isn’t cheap, we won’t buy it.”