Monday, August 29, 2011
What's up Vincent Tan?
I was once told by a friend to avoid investing in companies own by Vincent Tan. He said chances of you get screwed is high. Take this injection of Starbucks into Berjaya Food for an example. Read this one first.
So, Vincent Tan will get RM 79 million by unloading his 50% equity in Starbucks to the rest of us. That 79 million he said was very fair because he sells to us for 13.5 X PE. It is very fair because when you want to buy Starbucks directly from the US market, you will have to pay for US $ 37.92 for estimated 2011 EPS of US $ 1.52 and that is translated to about 24X PE.
Starbucks operate about 115 stores throughout Malaysia with revenue of RM 140 million sales for FY 2011 ended 30 April. The revenue has been growing at 10% plus for the last 3 years and I seriously doubt the growth can continue as I believe the saturation is setting in. That is the reason why he wants to unload this to the rest of us????
Second point: the dilution if people exercise their rights.
Let's jump straight to the last page of their proposal. Under this scenario, equity will jump from 50 million to 162 million. I think the earning will increase from 7.9 million to about 12.9 million. ROE before taking Starbucks is 15.8% and post Starbucks injection is 7.96%. Thank you Vincent Tan for being so kind by destroying shareholder value. I don't argue the brand value that Starbucks bringing in but he makes Berjaya Food shareholder overpaid is something difficult to swallow.
EPS before Starbucks injection is 7.9/141=0.056 and post is 12.9/386 = 0.0334. You do the rest of the math on the multiple.
What if he decided to inject McDonald? Will the shareholders get screwed further? Let me borrow this from Patrick Teoh.