Texchem: Restaurant business to drive growth

KUALA LUMPUR: Texchem Resources Bhd sees the restaurant division, its main contributor to profits, as a catalyst for earnings growth and plans to list the restaurant business within the next five years.
"In the next five years, if the restaurants business becomes very profitable, then we'll go for an IPO (initial public offering)," Texchem executive chairman Tan Sri Fumihiko Konishi said at the group's investor forum here yesterday.
Meanwhile, its president and CEO Brian Tan Guan Hooi said the restaurant business, which will be the main focus for the group, looks promising as it offers high margin and high growth.
He however, stressed that Texchem will continue to grow its three other business divisions, namely industrial, polymer, and food.
On a pre-tax profit basis for the financial year ended Dec 31, 2014 (FY14), the restaurant business was at RM15.3 million, followed by the industrial and food division with RM5.4 million and RM1.9 million respectively, while the polymer division suffered losses of RM14 million.
Japanese restaurant chain Sushi King is the largest contributor to Texchem's restaurant division. Other brands include Miraku, Goku Ramen, Yoshinoya, Hanamaru Udon as well as the latest Tim Ho Wan and Doutor Coffee.
Sushi King, which is owned and operated by Texchem's 70.35%-subsidiary Sushi Kin Sdn Bhd, will open another 12 outlets by year-end, bringing the total outlets to 102 from the current 90.
Last year, Sushi King recorded a same-store-sales growth of 6%.
Fumihiko said the group is also eyeing the entry of Sushi King into the Indonesian market within the year, pending the authorities' approval for the halal certificate.
Texchem has budgeted RM25 million in capital expenditure for the restaurant business over the next two to three years in a bid to bring in more new brands.
The funding, he said will be from the proceeds of the RM102.2 million disposal of a 28% stake in Sushi Kin last year, a move to unlock the value from the investment in the unit.
Texhcem's gearing ratio has dropped to 0.17 times following the disposal exercise, which Tan said is "too low" for the group.
"Therefore, we want to embark on expansion plans and we're targeting an ideal gearing ratio of 0.5 times," he added.
Tan expects the restaurant business' contribution to the group's revenue to reach up to 25% from the current 20%.
Commenting on the food business, Tan noted that Texchem will expand its processing facilities as well as a joint venture with strategic partners for investment in seafood processing and fishmeal production operation in east coast Endau.
On the polymer business, he believes the losses at the division will not prolong as the group is shifting its focus on the medical and life science segment after recognizing challenges in hard disk drive as well as electrical and electronic industries.
For the industrial division, he said the group is looking to expand its presence to East Malaysia, Myanmar and the Philippines.
Texchem's net profit slumped 84.75% to RM1.3 million in FY14 against RM8.5 million a year ago, mainly due to losses in the polymer division.