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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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LMS Compliance Ltd


LMS Compliance Ltd ("LMS" or the "Group") is offering 14m shares at $0.26 each for a listing on Catalist. The IPO will close on 29 Nov at 12 Noon nd starts trading on 1 Dec 9am. Based on the IPO price, the market cap is around $22.73m.

The Group has four main business units as shown below.

 

The Group offers quality testing and certification services for its customers across a gamut of industries, ranging from environment, food and product safety and quality as well as industry compliance.


The Group have the capability to conduct over 1,110 accredited tests and over 10,200 non-accredited tests for clients in mutliple sectors in Malaysia.


Financial Performance 


The Group has been growing steadily with revenue increasing from MYR 14.5m in FY2019 to MYR17m in FY2021. The net profit has been pretty consistent as well, starting from MYR 3.9m to MYR 4.9m over the same period.

Based on the prospectus (page 31), the PER is 12.4x based on pre-placement shares of 72.56m. If I use post placement shares of 87.435m the PER will increase to around 14.94x.


Proposed Dividends

The Group intends to distribute a dividend of at least 20% of net profit attributable to ownders for FY2022, FY2023 and FY2024.

What I like about the Company
  • Pretty resilient business - The Company has been growing rather steadily and most importantly, it is actually profitable. (Noontalk which I was just looking at it, it revenue generating, barely profitable but has a market cap that is twice that of LMS. TCSS can command a higher valuation? lol). The Company serves a wide ranging industry and sectors, making it more resilient
  • Company is profitable and cashflow generative - The Group has been profitable over the last 3 years and the latest 3M2022 continue to show good growth over the same period last year. It is also good that the Company intends to pay divdends over the next few years

Some of my concerns
  • Economy of Malaysia is unpredictable - Anwar just became the PM and have much work on hand to bloster the country's economy, which has suffered under poor political leadership
  • Forex - The MYR has been pretty weak against the SGD and if the longer MYRSGD trend is down, it will always be at the mercy of a strong SGD and profitabilty may be affected
  • Competitive landscape - The testing and certification industry is highly competitive and the Group has other competitors that are better capitalised
  • Malaysian businesses listed here have not performed in general - This is the sad part, whereby history is stacked against the Company. Based on my recollection, Malaysian businesses have traditionally not done well on SGX, so it will just add to the statistics
Mr IPO Chilli Ratings

Given the market volatilies in recent weeks, there are more compelling options in the market and I will wait the sentiments to return before "punting" the IPO market. The risk versus reward is just not worth it. There are many better options currently in the market place. 

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