Tamadam ... Dec10

Logistics and in-flight catering services provider Tamadam Bonded Warehouse Bhd is said to be contemplating spinning off its loss-making warehousing business and selling it to Amanah Raya Bhd.

However its managing director Eric Cheam declined to comment, saying that only once the board of directors was aware of any corporate exercise would it make an announcement as required by Bursa Malaysia’s guidelines.
Rumours are also circulating that the company is considering privatising its profitable food business, although management again declined to comment.

According to a source, the deliberations over whether to spin off its warehousing business, or to privatise its food business had come to an impasse due to disagreements between the company’s shareholders.
Tamadam’s largest shareholder is Brahim’s International Franchises Sdn Bhd (BIF), led by executive chairman Datuk Ibrahim Ahmad with a 52.29% stake, followed by IBH Capital (Labuan) Ltd with a 13.97% stake. Cheam has a 4.3% stake in the company.

Ibrahim, who has wide experience in the food industry, founded Dewina Food Industries in 1986 and steered the company to a public listing on the local bourse in 1995 before it went private in 2002.

Tamadam diversified from warehousing into the catering and food business in 2007, when it acquired a 51% stake in Brahim’s-LSG Sky Chefs Holdings Sdn Bhd (BLH) for RM130 million through the issue of shares. This was in effect a takeover by Ibrahim, although Cheam, the previous controlling shareholder of Tamadam, remained as managing director.

Tamadam Bonded Warehouse Sdn Bhd is keeping mum over speculation that it is mulling spinning off its loss-making warehousing business to Amanah Raya Bhd or privatising its profitable food business.

According to the company’s 2009 annual report, Tamadam’s warehousing business contributed about 4%, or RM6.76 million, of total revenue. However, the segment reported a loss before interest and tax of RM3.96 million.

Tamadam’s cash cow is its catering business, which is held via a 51% stake in BLH, which in turn has a 70% stake in LSG Sky Chefs Brahim’s Sdn Bhd (LSGB).  LSGB is a joint-venture company between BLH and Malaysia Airline System Bhd, which holds the remaining 30%.

Formerly known as MAS Catering Sdn Bhd, LSGB has the exclusive rights to supply and provide in-flight catering and cabin-handling services to MAS at the Kuala Lumpur International Airport and Penang International airport for 25 years until 2028.

The majority of Tamadam’s revenue and all of its profit come from the catering services, which contributed 96% or RM149.97 million to its topline in FY2009.

The catering business contributed RM21.98 million in profit before interest and tax of RM21.98 million, which was more than the entire company’s profit before tax and interest of RM17.49 million due to losses in the other divisions.

Tamadam also operates a food and beverage business as a franchisee of Italian company Barbera Caffè SpA. At present, the contribution is less than 1% of total group revenue, with loss before tax and interest of RM188,420 in 2009.
Going forward, its customers, such as AirAsia X and MAS, have announced they are increasing the number of routes and buying more planes. This is expected to be positive for the group.

For 3QFY2010 ended Sept 30, Tamadam posted a net profit of RM2.38 million on a revenue of RM42.17 million. This represents a year-on-year increase of 45% and 9.8% respectively from net profit of RM1.64 million and revenue of RM38.41 million. Earnings per share (EPS) for the quarter had improved to 1.33 sen from 0.91 sen previously.

For the nine-month period, net profit was up 78% y-o-y to RM5.43 million from RM3.05 million while revenue rose 11.4% to RM123.61 million from RM110.93 million. EPS increased from 1.71 sen to 3.03 sen, with net assets per share at 88 sen.

As at Sept 30, the company had cash of RM16.26 million and RM62.48 million in borrowings. Its net debt of RM46.22 million translates into a net gearing of 29.2%. However, it should be noted that Tamadam had large goodwill amounting to RM177.44 million on its balance sheet.