Wednesday, June 26, 2013
Auric Pacific / Food Junction
Auric Pacific / Food Junction: Auric Pacific has offered to take Food Junction private for $0.255 per share, 40% above the last transacted price. Excluding a one-off impairment charge and restaurant losses in FY12, this values the food courts segment at an ex-cash PE of just 4.8x. Hence, Auric will only need to fork out a net sum of $6.5m to take the remainder of Food Junction private (38.6% stake). Maybank KE views this deal as highly attractive, and a positive step in CEO Saw Phaik Hwa’s transformation of Auric Pacific. Going forward, Food Junction could become Auric’s earnings driver. Food Junction’s food courts are highly profitable, as net margins averaged 17.6% in the last five yrs. Auric is trading at a historical 10.8x PE and 11x EV/EBITDA – cheap, as it does not factor in the potential growth prospects after a possible restructuring of the restaurant business, and possibly rationalization of its various F&B brands to build up economies of scale. Maybank KE does not have a rating on this stock.