FOOD court operator Koufu has priced its initial public offering (IPO) at S$0.63 a share, ahead of a listing on the Singapore Exchange mainboard.
The IPO and the issuance of cornerstone shares will raise net proceeds of S$70.5 million, through the sale of 51.2 million new shares, 21 million new cornerstone shares and 45.8 million shares currently owned by Koufu founder Pang Lim and his wife.
This means that only S$43 million of the IPO proceeds will go to the company.
Upon its debut, Koufu will have a market cap of S$349.8 million, which is 13 times its 2017 earnings.
The IPO comprises a placement tranche of 90.7 million shares and a public offer of 6.3 million shares.
The public offer closes at 12 noon on July 16, with trading to commence at 9am on July 18.
Koufu was founded by executive chairman and CEO Pang Lim in 2002. His wife and executive director, Ng Hoon Tien, is a co-founder.
They will still own 78.7 per cent of Koufu after the IPO, or 75.5 per cent if an over-allotment option is exercised in full. The two have agreed to a six-month lock-up period on their shares.
Speaking to The Business Times after his IPO roadshows, Mr Pang said that the response from investors was "not bad".
"Our cash flow has been good and stable, from the first day till now," he said in Mandarin. Last year, Koufu generated a net cash flow of S$51 million from operations. Net profit was S$26.8 million, up 3.8 per cent from 2016. Revenue was steady at S$216.7 million.
Koufu derives 48.6 per cent of revenue from outlet and mall management. Last year, Koufu opened one new food court and closed two underperforming food courts where losses ran ahead of depreciation. It was also unsuccessful in renewing the tender for another food court.
Mr Pang said: "Over 16 years, the food courts we've closed are just these few."
Food court operators compete fiercely for tenders here, but not on the basis of rent alone, Mr Pang said: "Today, bidding is different. Food courts and supermarkets are typically anchor tenants of a mall, so they will look at your concept, design, business model, as well as how you will raise productivity, or use technology."
Koufu has taken various steps to raise productivity. More than 45 smart tray return robots are deployed at 16 food courts and coffee shops. Mobile ordering apps have also been implemented in some locations.
Nevertheless, there are fewer new mall openings in Singapore so Koufu is starting to look overseas for growth, and expanding its F&B retail businesses, Mr Pang said.
F&B retail accounts for 51.4 per cent of group revenue, derived from the 81 food stalls that Koufu operates in its food courts and coffee shops, its drink kiosks like R&B Tea, and full-service restaurants like Elemen.
Koufu plans to use S$30 million of the IPO proceeds to build an integrated facility that is expected to be completed in the second half of 2020.
Another S$8 million will be used to refurbish and renovate its F&B outlets. The remaining S$5 million will fund other expansion plans.
In particular, Koufu intends to complete the acquisition of a major stake in a business-to-business bakery in the fourth quarter this year, to expand its bakery, confectionery and hot kitchen food production business.
Plans are under way to open a Koufu food court at Sengkang General and Community Hospital and a Supertea F&B kiosk at Marina Bay Sands in July.
Although it has no fixed dividend policy, Koufu intends to recommend dividends of at least 50 per cent of net profit after tax generated in 2018 and 2019. This will exclude an interim dividend of S$12.5 million that has already been paid by Koufu this year.
Three cornerstone investors have taken up 21 million shares in Koufu, but are not subject to any lock-up restrictions.
DBS is the sole issue manager, bookrunner and underwriter for the IPO.