The Singapore Exchange (SGX) recently welcomed a new stock listing, Food Innovators Holdings Limited (SGX: KYB), on the Catalist board of the SGX on 16 October.
Its Initial Public Offering (IPO) raised S$3.1 million from 14 million new shares, of which 1 million was offered to the public, with the rest being placement shares. This gave the business a market capitalisation of S$24.9 million at its IPO. There was strong interest from retail investors as the public tranche was 6.3 times subscribed.
Food Innovators prides itself as a one-stop solution provider for traditional Japanese and Japanese-inspired European cuisines across Asia.
We explore what Food Innovators does as a business and what investors should know about it before investing.
#1 An Introduction to Food Innovators Holdings Limited’s Business
Food Innovators has two main business segments – Restaurant Leasing and Subleasing Business (RLSB) and Food Retail Business (FRB).
RLSB focuses on leasing restaurant premises from landlords and subleasing them to restaurant tenants. This gives a recurring revenue element to the group through the rental spread.
Meanwhile, FRB is involved in operating and managing restaurants, on top of providing F&B consulting, which is another recurring income producer.
Food Innovators mentioned in its IPO prospectus that its “two complementary businesses and ancillary services help us reap synergistic benefits”.
As at August this year, Food Innovators has 214 subleased properties in Japan. Furthermore, it runs a total of 26 restaurants, consisting of 12 in Japan, 10 in Singapore, and four in Malaysia. In our neighbouring country, it also owns a bakery and a central kitchen.
Source: Food Innovators IPO Prospectus
In Singapore, some of the brands it runs are Kadohachi, Niku Katsumata, Tendon Kohaku, and Man Man – mainly located in the CBD area.
Source: Food Innovators IPO Prospectus
Its locations in Malaysia are in Kuala Lumpur, where it also operates a central kitchen.
Source: Food Innovators IPO Prospectus
In Japan, majority of its restaurants are located near Tokyo, with two restaurants located in Miyako Island.
Source: Food Innovators IPO Prospectus
#2 Food Innovators Holdings Limited’s Financial Highlights
Over the past three years, Food Innovators’ revenue has trended upwards, increasing from S$37.8 million in FY2022 to S$43.8 million in FY2024. The leasing business brought in around 45% of FY2024’s total revenue, with the restaurant business bringing in the remaining 55%.
FY2022FY2023FY2024Revenue from RLSB(S$’ 000)19,13817,26519,614Revenue from FRB(S$’ 000)18,68022,40324,159Total Revenue(S$’ 000)37,81839,66843,773Gross Profit (S$’ 000)5,753 5,4237,853Gross Profit Margin15.2%13.7%17.9%Net Profit (S$’ 000)403(3,387)1,405
Source: Food Innovators IPO Prospectus
In terms of geographical breakdown, the majority of its revenue comes from Japan. In FY2024, the country accounted for 72.1% of its total revenue, with Singapore contributing 14.7% and the rest coming from Malaysia at 12.6%.
Gross profit margin, which is a measure of a company’s profitability, has grown from 15.2% in FY2022 to 17.9% in FY2024. This shows that Food Innovators has been able to control its costs well over the past three years.
Food Innovators was loss-making in FY2023 due largely to a decrease in government subsidies, recognition of one-off losses such as bad debt loss, and increase in labour costs. However, the F&B company has since gone back to black in FY2024, with a net profit of S$1.4 million. This translates to a net profit margin of 3.2% in its latest financial year.
According to its IPO prospectus, Food Innovators plans to pay out 20% of its net profit for FY2025 and FY2026 as dividends.
#3 Risks for Food Innovators Holdings Limited to Take Note Of
One of the major risk factors for Food Innovators is revenue concentration in Japan. With the majority of its revenue coming from its main Japanese market, an economic slowdown in the country could adversely affect its business.
The company also operates in a highly competitive landscape. It faces keen competition from other real estate companies such as Tenpo Ryutsu Net, Tenpo Innovation, and G-Factory, which offer restaurant leasing and subleasing as well. It also has strong competition from other restaurants in the F&B space that offer similar fare.
Since an F&B business is labour-dependent, the company has to rely on skilled and experienced personnel, who can be in short supply within the industry. This is especially so for experienced and skilled Japanese chefs.
For a full set of risk factors relating to Food Innovators, it’s always wise to read its IPO prospectus.
#4 Food Innovators Holdings Limited’s Growth Ahead
The company has laid out its plans in its IPO document. With gross proceeds of S$3.1 million, it plans to use S$500,000, or 16.2% of its proceeds, for expansion of the group’s food retail business outside of Japan.
Another S$500,000 will be used to bring new Japanese food brands into Singapore and Malaysia, and to fund the rights to operate more anime-themed restaurants in Japan.
Food Innovators currently holds the Moomin character brand licence and operates a cafe with that theme in Karuizawa, Nagano Prefecture. It plans to launch a second Moomin cafe by early 2025.
Source: Moomin
In terms of geographical expansion, the F&B company is looking at Australia and Vietnam as potential markets to expand into in the next two years due to their high growth potential and close proximity to Japan.
#5 Food Innovators Holdings Limited’s Share Price and Valuation
The IPO price for Food Innovators was S$0.22. Its shares are marginally down trading at S$0.215 each on 25 October (Friday).
At the company’s post-IPO earnings per share of 1.24 Singapore cents, it is going at a price-to-earnings (P/E) ratio of around 17x.
Source: SGX
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