Not Vested Yet.
This is a new series that I hope to bring unknown companies to people attention - if I ever write more lah! I may not necessary invest in these companies, but its always good to discuss about them.
Today I am going to write about a Singapore IPO. I never really look at an IPO before, but this caught my eyes because (1) it is a business that is selling ready-to-eat and ready-to-cook meat products in Singapore and Malaysia, (2) we know how this kind of business has been booming during this pandemic, and (3) demand for such products, in my opinion, can be deem “recurring” – people tends to go back to brands of a particular food constantly because of familiarity in taste and unwillingness to switch.
The Offering and The Business
1. Details of Offering – OTS Holdings will be offering 41.0 million ordinary shares at S$0.23, with ONLY 1.0 million ordinary shares by way of public offer – which already ended on 15 Jun 21. Trading starts at 9am on 17 Jun 21.
2. The Business – OTS Holdings manufactures ready-to-eat and ready-to-cook meat products in Singapore and Malaysia, with manufacturing facilities in Singapore and Indonesia. Their brands includes Golden Bridge, Kelly's, Golden Lion, Orchid, El-Dina and food service brand Kiziq through, Ellaziq Singapore, a halal food specialist. Their biggest customers, NTUC FairPrice and Sheng Siong, contributes 26.4% to the Group’s FY2020 revenue.
3. Financial Year End is as of Jun and not Dec.
4. Revenue grew by 31.4% from S$26.2m in FY19 to S$34.5m in FY20. HY21 Revenue stands at S$21.1m, around 60% of FY20 revenue.
5. Net profit grew 124% from S$1.5m in FY19 to S$3.5m in FY20. HY21 Net Profit stands at S$2.8m, around 80% of FY20 net profit.
6. The above 2 statements indicate the company is still growing. But the below table highlights a clearer picture of the revenue growth of the company - Not only is the revenue growing, the margins are increasing as well.
7. Dividend policy, as per prospectus, stated that the company recommend to distribute dividends of not less than 50.0% of our net profit attributable to owners of our Company for FY21 (excluding the interim dividends of S$1.0m declared in respect of FY21) and not less than 40% of our net profit attributable to owners of our Company for FY22.
Future Growth Plans
8. OTS Holding’s entry into Philippines will begin by the end of this year. It will contribute to the company’s FY22 results.
9. OTS Holding is also planning to product the plant-based meat products soon. (In my opinion, it seems to be vegetarian/mock meat canned food which I love.)
10. The company also intends to enter the East Malaysian market while strengthening its presence on e-commerce platforms.
11. The company set up its own distribution network in the overseas countries, instead of relying on local distributors, because this gives them more control in terms of distribution and marketing of its products.
The company, in my opinion, is considered forward thinking and innovative within a traditional industry. As an article
in Jan 21, the company actually worked with A-star to digitalized its factory operations.
13. Based on my research on 12 Jun 21 at a SS store, the pricing and the photos taken:
A table is computed:
In my opinion, despite a higher price, Golden Bridge stands out as the sole luncheon meat produced/manufactured in Singapore.
14. Competition – Just solely based on the table above, we can see that there are already numerous competitions in this ready-to-eat and ready-to-cook food segment.
15. One of the main questions is whether the company can sustain the grow in revenue in the post pandemic era.
To start off, I did not apply for the shares thru the ATM during the IPO application phase because 1 million shares for public offer is just too little. But I remain interested because of “recurring” revenue and its growth plans.
In my opinion, the risks stated above could be mitigated as (1) the company stands out from the crowded space as a product manufactured in Singapore (okay, I am biased here. But you get my point) and (2) We can always look back to the revenue in FY18 and FY19 for the view of a non-pandemic era kind of revenue. But do note that these revenues have not taken its future growth plan into account.
Eventually, a forward thinking and innovative company will eventually stand out from the crowd.
Part of the Information are taken from articles within The Prospectus, Investor-One website, The Edge and A-star website.
Thanks for sharing. Personally, I feel this is simply an exercise for the existing owners to unlock value in their company ownership. In terms of pricing, I doubt they can compete against the Chinese manufacturers; in terms of plant-based alternatives, it is again another competitive market. My two cents!ReplyDelete
Thanks for your comments. I dont think the company should compete with the chinese manufacturer. If you look at the pricing, I guess the company will use its Singapore manufacture branding as its unique point.
Regardless, Thanks again.
You haven't bought their goods to try... Just try and you'll know some are shitty goods... Except for the luncheon meats, i think the rest are really crap.ReplyDelete
Thanks for the comments!Delete