CHINESE restaurant chain owner and operator, Dragon-i Restaurant Sdn Bhd, is looking to divest a stake in its 12-year-old business to an investor or partner who will help grow it regionally.

While the preference of the restaurateur is to sell a stake in the food service business, sources say the owners are open to disposing of the business in its entirety should it receive an attractive offer.

Details are sketchy at this point as the proposal is still at a preliminary stage. Nevertheless, it is learnt that Dragon-i has hired Deloitte as its adviser. “Dragon-i is running a process to see where it takes them and has engaged Deloitte to handle the process. Things are still very fluid at this point,” a source tells The Edge without elaborating.

With this move, an earlier plan to float its shares on Bursa Malaysia may have been shelved.

Datuk Douglas Cheng Heng Lee, the largest shareholder of Dragon-i with a 34% stake, declined to comment when contacted by The Edge. Cheng is also the co-founder of Dragon-i.

According to the source, Dragon-i had been approached by private equity funds in the past but the owners appear to be considering a sale only now. “The owners are keen to sell a stake to either a financial or a strategic partner who is in a similar line of business to assist with Dragon-i’s overseas expansion plan.”

Dragon-i plans to add on four to six outlets each year. “And like all businesses, if the price is right, everything is for sale. Ideally though, they would like to maintain control of the business,” the source points out.

The Edge understands that Dragon-i has been offered around RM240 million to RM250 million for the entire chain. However, it is learnt that the now 30-outlet-strong restaurant business operating under the Dragon-i, Dragon-i Peking Duck and Canton-i names is valued at over RM300 million.

At least two separate sources tell The Edge that Dragon-i is looking at a valuation of at least 10 times its Ebitda (earnings before interest, taxes, depreciation and amortisation). While the financial numbers for the year ended June 30, 2016, have yet to be filed, the latest data from the Companies Commission of Malaysia reveals that Dragon-i posted a profit before tax of RM10.59 million and a net profit of RM6.92 million in FY2015. This was achieved on a revenue of RM105.63 million. Accumulated profit as at the same date stood at RM11.32 million. Dragon-i had total liabilities of RM41.25 million, of which RM27.53 million was current.

Apart from Cheng, the shareholders of Dragon-i are Tan Boon Seng (20.30%), Tan Boon Wy (14.85%), Tan Boon Yao (14.85%), Datuk Henry Yip Choong Hung (14%) and Lee Kuan Eng (2%). The three Tans are siblings and the sons of the late Datuk Vincent Tan, who was also a founding member. He passed away in April last year and Boon Seng has since replaced his father as the chairman of the company.

Cheng, Boon Seng, Boon Wy, Boon Yao and Yip also sit on the board of Dragon-i. One other director is Teo Kheng Swee.

Dragon-i also has a 50% subsidiary called Divine Kitchen Sdn Bhd, whose registered address is in Kota Kinabalu, Sabah, where it operates one outlet.

According to its website, the first Dragon-i outlet opened at Mid Valley Megamall in 2004. The restaurant offers dishes that are native to Shanghai, Szechuan, Beijing and Lanzhou, such as Shanghai fried noodles and dumplings, while Canton-i offers Cantonese food from Hong Kong, such as dim sum and wonton.

The group’s domestic expansion plan for the year includes the opening of Dragon-i and Canton-i restaurants in Genting Highlands and a Dragon-i outlet in AEON Tebrau City Store and Shopping Centre, Johor.

Abroad, it plans to grow the business via joint ventures or the franchise model. A restaurant has been planned for Bangkok, Thailand, next year and another for Melbourne, Australia. This is not the first time Dragon-i is venturing overseas. In 2008, it had an outlet in ION Singapore but this closed in 2013 mainly due to a labour shortage.

Next year, Dragon-i plans to start a new restaurant concept.

Meanwhile in June, Cheng’s wife Charlene Yeo Ming Ling sold 80% of T & CO Coffee Sdn Bhd to AirAsia Bhd for RM914,000. 

Cheng himself is said to be involved in the TREC lifestyle nexus located in Jalan Ampang where Zouk Kuala Lumpur is housed. He holds a stake in developer Trec Holdings Sdn Bhd via Daman Land Sdn Bhd. 

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