JB Foods Limited

JB Foods Limited ("JB Foods" or the "Company") was founded in 1980s and is today, one of the major cocoa ingredient producers in Malaysia with a production capacity of 60,000 tonnes each year. According to the prospectus, it has a 13.3% market share in terms of cocoa revenue in Malaysia.


Its main businesses are the sale of cocoa ingredients products and is majority driven by sale of Cocoa powder and Cocoa butter.

JB Foods is offering up to 100m shares for the IPO of which 84m are new shares and the rest vendor. 3m shares will be for the public and 97m shares via placement. The IPO price is $0.30 each. The IPO will close on 19 July 2012 at 12pm and starts trading on 23 July 2012. (For those still waiting for the IHH Healthcare IPO proceeds to come back, sorry... not in time for you).


The Company operated at 98.4% of its production capacity in FY2011 and intend to increase it production capacity over the next 2 years from 60,000 tonnes to 85,000 tonnes. It has also entered into a call option to purchase 2 facilities in Indonesia to be completed in second half of 2013.

Financials performance over the last 3 years.

For FY2012, the Directors intend to recommend and distribute not less than 30% of its audited combined net profit attributable to shareholders as dividends.

Revenue for the Company grew from MYR 386m in FY 2009 to MYR 690m in FY2011 and profit after tax grew from MYR 24.2m to MYR 51m in the same period. Based on post IPO share capital of 400m shares, the EPS grew from 6.1 sen to 12.8 sen. Based on today's exchange rate of 1 Ringgit to 0.3959 Singapore Dollar, the EPS for FY2011 was Singapore 5.06 cents.That translate into a historical PER of 5.92x. Very decently priced considering that the demand for "Malaysian companies"is currently basking in the limelight following the IPOs of FELDA and IHH.

The market cap for the Company post listing will be S$120m. The only thing you may want to note is that post-IPO, majority of the shares (75%) will be held by JBC Group and ECOM. As such,liquidity and interest may fall once the initial euphoria is over unless they are able to continue attracting investors into the company.


Other listed peers


One listed peer on SGX will be Petra Food Limited. For FY2011, Petra's revenue was S$2.1 billion and the net profit after tax was S$80.2m. Petra has a market cap of $1.497b versus $120m for JB Foods. Petra is trading at a historical PER of around 19.5x and a forward PE of 17x. Interestingly, when Petra Food was listed in 2004, its market cap was only S$262.8m. The 5 year share price chart of Petra below for interest sake.





Fair value


Personally, i think this company is priced to sell. Assuming the profits grow 20% (just guessing), the EPS will be 5.06 x 1.2 = Singapore 6.08 cents. Assuming a fair market value of 8-10x (big discount from Petra's 17x due to its smaller size), the fair value should be around Singapore 48 to 60 cents. The dividend payout of 30% will imply a dividend yield of 6.08% for FY2012.


Conclusion - Hoot Ah! 


Give that the IPO of the JB Foods is attractively priced with upside potential, dividend yield and positive market sentiments, i will give it a 3 chillis rating under the new rating system. As the float for the public is only 3m shares, it will only make economic sense if you managed to get at least 3 lots and that will usually be given to investors who apply for at least 50 lots (i am guessing). Happy IPOing.