Highlands Coffee Sale, Preferred-Share Redemption Could Lift Jollibee EPS
A potential gain from the Highlands transaction could boost near-term earnings, while eliminating preferred dividends may provide a recurring EPS benefit beginning in the fourth quarter.
A potential gain from the Highlands transaction could boost near-term earnings, while eliminating preferred dividends may provide a recurring EPS benefit beginning in the fourth quarter.
Jollibee Foods Corp.’s sale of part of its stake in Highlands Coffee could provide a one-time lift to third-quarter earnings, while the planned redemption of its Series B preferred shares may improve earnings available to common shareholders in subsequent quarters.
Jollibee’s wholly owned subsidiary, JSF Investments Pte. Ltd., agreed to sell an 11% interest in Highlands Coffee's holding company to Viet Thai International Joint Stock Co. for 2.3 trillion Vietnamese dong, or about $88 million, plus adjustments.
The transaction values the Vietnamese coffee platform at $800 million, a substantial premium to its carrying value in Jollibee’s books. If completed by the Sept. 30 quarter-end, the sale could allow Jollibee to recognize a disposal gain in its third-quarter results.
Following completion, Jollibee’s interest in Highlands Coffee will fall to 49% from 60%, while Viet Thai’s ownership will rise to 51%. The transfer of control could require Jollibee to deconsolidate Highlands and recognize its remaining 49% interest at fair value.
At the deal’s implied valuation, Jollibee’s retained stake would be worth about $392 million. The $88 million consideration, combined with the potential remeasurement of the remaining investment, could produce a sizable accounting gain.
The exact amount remains uncertain. It will depend on Highlands Coffee’s carrying value, goodwill, noncontrolling interests, foreign-currency translation adjustments, taxes, and transaction costs. The sale is also subject to regulatory clearances and other closing conditions. If completion occurs after Sept. 30, the gain would shift to the fourth quarter or later.
Jollibee’s second earnings lever comes from redeeming nine million Series B preferred shares on Oct. 14. The company will pay ₱1,000 a share, or ₱9 billion in principal, plus the final accrued dividend.
The preferred shares carry a 4.2405% annual dividend, costing Jollibee about ₱381.6 million a year. Preferred dividends don’t reduce consolidated net income, but they are deducted when calculating earnings attributable to common shareholders and basic earnings per share.
Once the shares are redeemed, that deduction will disappear. Based on Jollibee’s recent weighted-average common-share count, removing the preferred dividend could add about ₱0.33 a share to annual EPS, assuming no replacement preferred issuance.
That benefit won’t affect third-quarter EPS because the redemption occurs after the quarter closes. It should begin contributing during the fourth quarter and become fully visible in 2027.
Together, the transactions create two distinct earnings catalysts: a potentially large but nonrecurring gain from Highlands Coffee, followed by a smaller but recurring EPS benefit from eliminating the Series B preferred dividend.
For investors, the immediate question is whether the Highlands transaction closes in time for third-quarter recognition. After that, attention will turn to the steadier benefit of a capital structure with fewer claims ahead of common shareholders.
We’ve been blogging for free. If you enjoy our content, consider supporting us!
Disclaimer: This is for informational purposes and is not investment advice. Figures come from company disclosures and exchange data; valuation ratios reflect the author’s calculations based on cited inputs.