KUALA LUMPUR (July 27): Loss-making in-flight catering services provider Brahim's Holdings Bhd has engaged MHC Trading (M) Sdn Bhd to manage and operate its wholly-owned subsidiary Tamadam Industries Sdn Bhd's business in warehouse rental, bonded warehousing, freight forwarding and transportation services for a period of up to three years.

This follows a proposal received from MHC, which is involved in retail sale of food products, to help turn around and grow the business of Tamadam.

"The proposed outsourcing will allow for a business turnaround of Tamadam, which is presently operating below its optimal level. More importantly, the proposed outsourcing will provide Brahim's with a solution to its outstanding loan position with OCBC Al-Amin Bank Bhd, for which it does not have the financial capacity to service at this juncture," said Brahim's in a bourse filing today.

Tamadam today entered into an agreement with MHC for the proposed outsourcing. Under the deal, MHC will be fully responsible for all investments required by Tamadam including plans for expansion and revamp. In return, a management fee of RM50,000 will be remunerated on a monthly basis from the day of signing until expiry or termination of the agreement to be paid to MHC.

"Profits generated from Tamadam will initially be used for the repayment of Brahim's overdue loan with OCBC amounting to RM75 million based on the stipulated repayment schedule within three years, and subsequently to be divided between MHC and Brahim's on a 60:40 basis," said Brahim's.

Tamadam has been involved in the warehouse rental, bonded warehousing, freight forwarding and transportation services for 40 years. It owns a bonded warehouse in Port Klang, Selangor on a piece of leasehold land measuring 15 acres.

"However, in recent years the performance of Tamadam's operations has been on a downtrend and coupled with the prolonged downturn in Brahim's flight catering business, it is now timely to look at turning around and growing the operations of Tamadam," said Brahim's.

It noted that MHC's shareholders and directors have extensive experience in the logistics and warehousing industries and is of the view that they can turn around Tamadam, which presently has many operational inefficiencies, and also to further expand its business activities and revenue streams.

The board of directors of Tamadam will be jointly controlled by Brahim's and MHC, while a new management team will be formed by MHC which will be responsible for the business and operations of Tamadam.

Brahim's said at present, its core business of flight catering is unable to generate sufficient revenues due to the virtual standstill of the passenger aviation industry, leading to losses and inability to service its borrowings.

In 2013, Brahim's obtained a financing facility of RM155 million from OCBC. On April 22, the company announced that it had received a letter of demand from OCBC for the amount in arrears.

The proposed outsourcing is expected to be completed in the third quarter of 2024, and Brahim's expects it will contribute positively to its future earnings per share, as well as reduce its gearing level as its loan with OCBC is repaid.

Shares of Brahim's, which has been a Practice Note 17 entity since Feb 28, 2019, closed unchanged at 19 sen today, bringing a market capitalistion of RM58.36 million.