No SignBoard IPO: Here’s a 5 minute Digest

No Signboard Holdings Ltd is going head to head with  JUMBO Group Ltd (SGX: 42R) as it preps itself for a public listing. Here's a quick 5 minute digest on the company:

No SignBoard IPO Details

The IPO will close at noon on 28 Nov, and trading will begin 30 Nov. A total of 65.7 million shares will be on offer during the IPO period at a price of S$0.28 a piece. 2.5 million shares will be for public subscription while the remaining 63.2 million shares will be placed out. There are several cornerstone investors taking up on the placement shares of 59,265,500 shares, which include:

• Asian Opportunities Absolute Return Master Fund,
• Goi Kok Ming (COO of GSH Limited, son of Popiah King)
• JPMorgan Asset Management (Singapore)
• LB Asset Management
• Lion Global Investors & more

No SignBoard Limited Profile

The businesses can be classified into 3 main segments – restaurant, beer, and ready-meal.   We won't delve into the restaurant biz since most people are familiar with it. The beer business was acquired only in June 2017 where it owns Draft Denmark brand of premium beers and they are sold at over 150 points of sale in our country. Here is an excerpt from Mr Lim where he hopes to push the boundaries of flavours in beers:

"Like running a food business, I want to come up with a menu of many interesting beer flavours including fruit, coffee and chilli. Instead of the old-school style of going with a single type of beer, the new beers will come in all sorts of colours and flavours."

Besides making inroads in the beer industry, No Signboard Seafood is diversifying its business into the ready-meal segment. In April 2017, it started The Ma2 (Mama) Shop, a cluster of vending machines that offers No Signboard Seafood-inspired dishes such as chilli crab spaghetti, Hokkien mee and nasi briyani in 7 locations including Tampines and Holland Drive.

Use of Proceeds

  The listing will raise gross proceeds of S$21 million, with $2.3 mil going towards listing expenses. No Signboard Holdings plans to use the remaining proceeds mainly for:

1. Establishment of new chain of casual dining restaurants (23.8%)
2. Development of beer business (47.6%)
3. Development of ready meal business (9.5%)
4. General working capital purposes (8.0%)

Financial Highlights

Revenue for the company has been declining over the past 4 years. The same can be said for its net profits if you exclude a one-off $1.1mil coming from “Termination of distribution agreement”.

Our Take on No Signboard IPO

Overall, we are neutral about this IPO for its flipping potential and positive on its long-term potential. Our thoughts are as follows:

For flipping: Neutral

Price of $0.28 is reasonable at 13.9x P/E ratio. Assuming we use RE&S Holdings IPO of 18x P/E, it will be around $0.36. 1 lot will nett you $80 bucks.

We may see a pent-up demand from the retail investors since only 2.5 million shares are issued to the public. However, the Cornerstone Investors are not subject to any lock-up restrictions in respect of their shareholdings. Thus, this may result in a huge sell pressure from the funds.

I personally reckoned that it will not go up too much since the financial numbers are painting a poor picture of the company too.

For long-term holding: Negative

To be honest, I feel that No Signboard is spreading itself too thin.

For the Draft Denmark Beer, it is widening the beverage's distribution in Singapore by partnering local beverage company Yeo's to make its debut in major supermarket chains including Giant and FairPrice. Maybe i should go buy and try it out... by reviews (https://untappd.com/b/draft-breweries-denmark-aps-draft-denmark-fresh-lager/1138349) (https://www.burpple.com/dishes/1054970/draft-denmark-fresh-lager) were "meh"...

Sales at core restaurant segment on a downward trend - should be due to fierce competition, similarly as other F&B operators.

In addition, the company has not made clear on the new Chinese restaurant's dining concept too. They mentioned of the following:

• Intend to focus on satellite towns and residential areas to appeal to a different customer profile that is typically younger and family oriented.
• Exploring potential strategic dining locations, such as Jurong East and Punggol, where our target customer segment is clustered.
• Planned of 2 new outlets to be set up in the 2nd half of 2018.

JE and Punggol has tons of dining establishments already. It will require a lot of marketing to attract diners to begin with. Numbers doesn't look enticing too. Based on expected 1.7 cents of EPS FY2017 and 30% dividend payout ratio, dividend yield only amounts to 1.8%. And this is including a one-off gain. To sum up, it seems that the management is acknowledging that its core biz is stagnant now and eagerly trying to venture into many different areas. That equates to much more time, effort & capital required for each segment and the firm risks being not able to focus on what's important. We’ve released our 3 HOT growth stock picks which could skyrocket >100% by the end of 2017. History has shown that getting in early on a good idea can often pay big bucks – so don't miss out on this moment. Simply click here to receive your copy of our brand-new FREE report, “3 stocks poised for explosive growth”. Do Like us on Facebook too as we share the latest investing articles and stock ideas for you!