Wellspire eyes long-term growth strategy in Asean after IPO

ALTHOUGH the consumer sector is one that is often sought after by investors for its ability to churn out healthy cash flows, there are not that many new listings in this segment of the business. This is despite the fact that the number of new listings on the ACE Market reached record levels this year.

The last significant consumer play initial public offering (IPO) was Farm Fresh Bhd, which debuted on March 22 at a demanding price earnings (PE) multiple of almost 35 times times.

Farm Fresh’s current share price of RM1.60 a piece is up almost 20% from its listing price of RM1.35 a share. It has a market capitalisation of close to RM3bil.

In January 2023, another pure consumer company will come to the market.

Wellspire Holdings Bhd, which will get listed on the ACE Market on Jan 16 is a much smaller company than Farm Fresh, raising only RM28.66mil and which will have a market capitalisation of RM163mil upon its listing at a price of 23 sen per share.

The offer price is pegged at a PE multiple of 14.7 times FY2021 earnings.

That Wellspire is a consumer company heading to Bursa Malaysia is not the only unique aspect of the company.

Two other facts make it even more special.

One, that is majority owned by a Singaporean businessman, who had studied in China and the other is that Wellspire’s business is in Thailand. So why is the company even listing in Malaysia?Wellspire chief executive officer and executive director Mo Guopiao, who owns 70% of the company, said the listing on a foreign exchange will accord greater recognition and enhance the group’s profile in Thailand, while providing a venue for a potential expansion of the group’s operations and target market in Malaysia.

“We believe that the IPO will facilitate our longer-term growth strategy in the Asean region, particularly, in Malaysia and Thailand,” the 41-year old tells StarBizWeek.

Following the listing, Guopiao’s interest in Wellspire will come down to about 45%.

Wellspire is selling a total of close to 250 million shares via its listing, made up equally of new shares and existing shares of its owners. The company will receive RM28.7mil from the new share issuances of which it plans to use RM16mil for the acquisition or construction of a warehouse and operational facility in Thailand.

An additional RM5.96mil will be utilised for working capital and the balance for listing expenses.

Guopiao says that the company’s main focus, presently, is to expand the reach of its distribution network.

He points out that the group has an established network of indirect distribution channels, where it distributes snack food products to 43 sales and distribution points across Thailand.

“We have established long-term business relationships with our customers that are large chain retail outlets, and this provides market access of our products to a large pool of end-consumers, thus allowing us to grow our footprint in Thailand,” he says.

According to him, with the new warehouse and operational facility, the group’s capacity for general warehousing space as well as its chiller room capacity increases, in-line with its expansion plans.

The new warehouse is expected to result in cost savings of approximately RM1.6mil, although rental expenses for the warehouse is not a material element of the group’s operating costs.

“Currently, at least 95% of our cost of sales are rooting from material costs. Thus, the saving from annual rental cost will help to reduce group cost but does not significantly affect the margin of the group.

“The location of the warehouse and operational facility will be in the central region of Thailand, within the Pathum Thani province,” he says.

Wellspire is a distributor of consumer packaged snack foods, such as seeds and nuts as well as baked and confectionery products.

It is an exclusive distributor of the “ChaCha” brand sunflower seeds and nuts for the Thai market, which is also its major revenue contributor.

“Since 2017, we have introduced several new products to the Thai market. Our efforts to increase sales mix is evident based on our revenue from other snack foods, as it almost tripled in the financial year 2020 (FY20) as compared to prior year. Despite the Covid-19 pandemic, we continued to record higher sales of these other snack products in FY21,” Guopiao says.

Guopiao highlights that the group will continue to source and import new products from its existing suppliers as well as new third parties from foreign countries.

“Also, we have plans to bring in other snacks such as potato chips, tortilla chips, and corn puff snacks to the Thailand market. We plan to also import dairy beverages that include ultra high temperature beverages such as yoghurt and milk products,” he adds.

Guopiao expects its eCommerce channel to be another source of its business growth.

As such, part of the IPO proceeds will be utilised to enhance the features of its existing eCommerce, to further complement our existing business model and to increase its online presence, according to him.

“We plan to engage a website developer by the first quarter of 2023, to re-design the eCommerce platform, providing users convenience to carry out transactions, as well as facilitating storage of users’ past purchase patterns and search trends to better match specific products to users’ preferences and purchase profiles,” Guopiao says.