PublicInvest Research accords FV of 77c for InNature IPO

From left: InNature founder and managing director Datin Mina Cheah-Foong and chairperson Datuk Simon Foong at the company's prospectus launch on Jan 29, 2020

KUALA LUMPUR: PublicInvestment Research has accorded a fair value of 77 sen for Innature Bhd based on a 15 times price-to-earnings (PE) multiple to its FY2020F EPS of 5.1 sen which excludes the listing cost.

The offer price is 68 sen and the closing application date is on Thursday.

InNature retails and distributes The Body Shop (TBS) brand of products through its subsidiaries, which hold the TBS franchises in West Malaysia, Sabah and Labuan; Vietnam; and Cambodia.

As at Dec 31,2019, InNature has 124 points-of-sale, besides having an online presence.

The group's business garners customers from all walks of life, with the majority of its customers urban, young, and women. In collaboration with Natura Cosmeticos SA, InNature has also recently introduced the Natura beauty brand into Malaysia to expand its brand portfolio and strengthen its market share leadership in the naturals sector of the beauty industry.

Apart from developing a new business with the Natura brand in Malaysia, InNature intends to drive TBS same-store sales growth in Malaysia while achieving greater market penetration in Vietnam and Cambodia post-IPO.

“The IPO is expected to raise approximately RM50.4mil from the issuance of 74.1 million new shares. Besides utilising 68.5% of the proceeds for capital expenditure, 11.3% of the proceeds are allocated for new business development, earmarking future growth, ” it said.

PublicInvest Research said InNature’s growth will be dependent on: i) TBS same-store sales growth in Malaysia, ii) TBS retail store network expansion and TBS brand awareness building in Vietnam, iii) TBS expansion in Cambodia, and iv) development of a new businesses with the Natura brand in Malaysia.

InNature’s competitive strengths include: i) being a leading mono-brand beauty retailer in Malaysia, ii) strong track record and long-term work relationship with The Body Shop International Limited, iii) TBS is a well-established global

brand, iv) 100% vegetarian products, which are consumers' preference on the growing trend for natural beauty products, v) "masstige" positioning, and vi) strong base of loyal customers.

Key drivers may include: i) growing population and growth of disposable income, ii) increasing spending power by female consumers, iii) growth of the online market for cosmetics and personal care (CPC) products, iv) growing demand for natural-based ethically-sourced products and positive ethical consumerism behavior, v) growing demand for halal-compliant products among consumers, vi) growing market for prestige and “masstige” products, and vii) expanding personal care routines.

Key downside risks, among others, include i) competitive environment, ii) dependency on the performance of economy and consumer spending patterns, iii) dependency on its ability to secure optimal locations and renewal of tenancies or leases, and iv) fluctuations in foreign exchange rates.

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