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IPO Chilli Ratings

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Food Innovators Holding Limited

Food Innovators Holdings Limited ("FIH" or the "Company") is offering 14m shares at $0.22 each, for which 13m shares will be through placement and the remaining 1m shares via a Public Offer. The IPO will close on 14 Nov at 12 noon and starts trading on 16 Oct 9am.  FIH has two business models - the first is to be a master lease and sublease the space to other tenants and the second is to operate and manage restaurants.  The Company currently has 12 restaurants in Japan, 10 in Singapore and 4 in Malaysia. The market cap based on the IPO price is around $24.9m. Financial Highlights FIH's revenue grew from $37.8m in FY2022 to $43.8m in FY2024. It is quite funny to see that being a master land lease holder has a higher margin than operating the restaurants, once again illustrating the point that it is better to be a landlord to shake leg and collect rent. According to the prospectus, the PER is around 19x. The Company intends to pay 20% of its net profit after tax a
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UnUsUaL Limited



Unusual Limited ("Unusual" or the "Company") offered 96.99m shares at $0.20 each via placement. There is no public tranche hence rendering my chilli ratings less meaningful. At the IPO price, the market cap is around S$128.6 million. 

The Company specialises in the production and promotion of large scale live events and concerts by renowned international artistes such as the recent Jacky Cheung world tour concert in Singapore.


Financial Statements


The Company generated less revenue for 9M2016 but was able to maintain its profitability by improving the net margins from 16% to 24%. In this regard, for the 9M 2016 period, it actually showed a 39.5% improvement period on period to 0.60 Singapore cents on a fully diluted basis. The Company is likely to perform better for FY2016 since it has yet to factor in the last 3 months performances.

Assuming it ended the year at $4.5m (i am guessing), the EPS is around 0.70 Singapore cents. That translate into PER of around 28.6x

Shareholders


Public investors will hold about 15% of the Company with mm2, a listed company, holding 41.9% of Unusual. The original founders, Leslie and Jonny Ong will hold about 40.3% of Unusual. In addition, SPH AsiaOne (one of the pre-ipo investors) may also subscribe up to 25.636m Placement Shares. In other words, the placement is tightly controlled. 

Use of Proceeds

The proceeds will be mainly used for promotion and production projects and expanding the group's business.

What i like about the Company
  • Strong hands. Looking at how mm2 rose from a small cap Company to a company currently valued at >$500m market cap and trading at 43x PE, you will probably wonder if the investors backing mm2 Asia are pretty "unusual" as well. With the same backers behind Unusual Limited as well, i can probably guess that the Company is pretty "well supported". The shares will be tightly controlled post IPO, somewhat similar to mm2 Asia.
  • The price paid by the pre IPO investors of 17 cents are not too far from the IPO price.
  • Looking at the milestone and concerts hosted, the Company probably "cornered" the concert market in Singapore, which is probably right. lol. They even claimed in the Competition section that "there are no major competitors which match our Group's profile in the industry".
  • There is probably much synergy with mm2 Asia, leveraging off each other's network and a demand for "one stop solution" for artistes to perform in the  ASEAN region
  • Lack of competitors in Singapore
Some of my concerns
  • This is definitely not a "value buy" to me. The Company is being listed at >30x historical PER
  • Key man risk. This is a "people" business in Asia. You will need the founders and management to run the business with integrity as artistes tend to be quite "sticky". While it is good for the Company if the artistes are "sticky", it also mean that the key man risk is pretty real. In other words, the huge premium of 15.91 cents you pay over the NAV of 4.09 cents is to make sure the founders and management stay together. In the event that they quarrel and split, this premium will evaporate as well. Having said that, the brothers have been working together for a long time, the question then is whether they can work well with majority owner Melvin Ang from mm2 Asia
  • The cash in the Company was dividend out to the founders and ironically, there is no clear dividend policy announced
  • The staging of concerts depended greatly on the popularity of the artistes as well as the general state of economy. While Singaporeans are probably suckers (including myself) to pay high prices for concerts, there is a limit to how much more they can charge for the tickets
  • While it is a stable business, I am not sure how scalable it is in this region as demonstrated by the space in which it is operating. 
Chilli ratings

My chilli rating is not meaningful since there is no public tranche. If i have to hazard a guess, it will debut well given the strong hands and "tight supply" and there are  not many shares available for the public. However, valuation-wise, i will give it a one chilli rating for reasons mentioned above. 

Happy IPO Singing! 
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