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Pan Malaysia Corp to acquire 51% stake in A&W Malaysia

PETALING JAYA: Confectionery and cocoa-based biscuits maker Pan Malaysia Corp Bhd (PMC) has entered into a sale and purchase agreement with Inter Mark Resources Sdn Bhd to acquire a 51% stake in A&W (Malaysia) Sdn Bhd for RM21.04 million.

Inter Mark is the master developer and exclusive franchisee of the A&W franchise for Malaysia and operates the A&W chain of restaurants via its wholly owned subsidiary, A&W (Malaysia) Sdn Bhd. Upon completion of the acquisition, Inter Mark will hold a 49% stake in A&W Malaysia, compared with 100% currently.

The proposed A&W acquisition will be completed via a combination of cash amounting to RM11.57 million and transfer of 63.11 million PMC shares at 15 sen per share.

“The proposed acquisition provides an opportunity for the PMC group to expand and diversify its revenue and earnings base from the mainly chocolate and confectionery business into the rapidly growing quick service restaurant (QSR) business,” the group said in a filing to the bourse today.

For the financial year ending Dec 31, 2022 (FY22), Inter Mark guarantees that A&W Malaysia’s earnings before interest, tax, depreciation and amortisation (ebitda) should not be less than RM13.75 million. If the ebitda of A&W Malaysia for FY22 falls short of the guaranteed sum (85-90% of RM13.75 million), Inter Mark will pay A&W Malaysia the amount of the difference between the guaranteed sum and the actual ebitda.

“Malaysia’s food service sector is forecast to recover strongly and grow from RM64.9 billion in 2020 to RM109.08 billion in 2025 at a compound annual growth rate of 10.9%. The industry growth is expected to recover with an increasing number of transactions as the economy recovers from the Covid-19 pandemic.

As at Aug 31, 2021, A&W Malaysia operates 62 outlets throughout Malaysia, of which more than 50% are concentrated in Kuala Lumpur and Selangor. The potential to expand to locations outside the Klang Valley remains vast. The target is to achieve 100 outlets by 2023 and emerge as the as one of the top three QSR operators in Malaysia.

PMC said it is expected that A&W Malaysia will capture an increasing share of the expanding QSR market in Malaysia.

“A&W Malaysia will also continue to leverage on technology and the lessons of the pandemic by capitalising on platform aggregators and its own channels for delivery, while exploring options such as ghost kitchens and kiosk concepts which have a lower operating expenditure such as rental and labour costs.”

The proposed A&W acquisition is expected to be completed by the third quarter of the financial year ending June 30, 2022. It is expected to contribute positively to the long-term future earnings of the PMC group.

Meanwhile, on the results front, PMC’s net loss for the fourth quarter ended June 30, 2021 widened to RM38.16 million from RM6.25 milion in the corresponding quarter in the preceding year mainly due to a RM25.1 million impairment on goodwill, a RM2.1 million impairment loss on amount owing by a related company and RM2.0 million foreign exchange loss on unquoted investment. Revenue increased 1% to RM8.71 million from RM8.63 previously.

For the 12-month period, its net loss for the cumulative period widened to RM42.31 million from RM7.93 million due to the goodwill impairment of RM25.1 million, impairment loss on amount owing by a related company of RM2.1 million and foreign exchange loss on unquoted investment of RM2.0 million, all of which are non-cash items.

Revenue dropped 33.8% to RM36.59 million from RM55.27 million previously mainly caused by a big slump in export sales.

The group declared an interim single-tier dividend of 0.5 sen per share for the financial year ended June 30, 2021.

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