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OTS Holdings: Potential Multi-Bagger
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Published today by T.U.B Investing
Let' s Talk: 15 Must Know Information About OTS Holdings Ltd
Not Vested Yet.
This is a new series that I hope to bring unknown companies to people attention -
if I ever write more lah! I may not necessary invest in these companies, but its always good to discuss about them.
Today I am going to write about a Singapore IPO. I never really look at an IPO before, but this caught my eyes because (1) it is a business that is selling ready-to-eat and ready-to-cook meat products in Singapore and Malaysia, (2) we know how this kind of business has been booming during this pandemic, and (3) demand for such products, in my opinion, can be deem &ldquo recurring&rdquo &ndash people tends to go back to brands of a particular food constantly because of familiarity in taste and unwillingness to switch.
The Offering and The Business
1. Details of Offering &ndash OTS Holdings will be offering 41.0 million ordinary shares at S$0.23, with ONLY 1.0 million ordinary shares by way of public offer &ndash which already ended on 15 Jun 21. Trading starts at 9am on 17 Jun 21.
2. The Business &ndash OTS Holdings manufactures ready-to-eat and ready-to-cook meat products in Singapore and Malaysia, with manufacturing facilities in Singapore and Indonesia. Their brands includes Golden Bridge, Kelly' s, Golden Lion, Orchid, El-Dina and food service brand Kiziq through, Ellaziq Singapore, a halal food specialist. Their biggest customers, NTUC FairPrice and Sheng Siong, contributes 26.4% to the Group&rsquo s FY2020 revenue.
Revenue Growth
3. Financial Year End is as of Jun and not Dec.
4. Revenue grew by 31.4% from S$26.2m in FY19 to S$34.5m in FY20. HY21 Revenue stands at S$21.1m, around 60% of FY20 revenue.
5. Net profit grew 124% from S$1.5m in FY19 to S$3.5m in FY20. HY21 Net Profit stands at S$2.8m, around 80% of FY20 net profit.
6. The above 2 statements indicate the company is still growing. But the below table highlights a clearer picture of the revenue growth of the company - Not only is the revenue growing, the margins are increasing as well.
7. Dividend policy, as per prospectus, stated that the company recommend to distribute dividends of not less than 50.0% of our net profit attributable to owners of our Company for FY21 (excluding the interim dividends of S$1.0m declared in respect of FY21) and not less than 40% of our net profit attributable to owners of our Company for FY22.
Future Growth Plans
8. OTS Holding&rsquo s entry into Philippines will begin by the end of this year. It will contribute to the company&rsquo s FY22 results.
9. OTS Holding is also planning to product the plant-based meat products soon.
(In my opinion, it seems to be vegetarian/mock meat canned food which I love.)
10. The company also intends to enter the East Malaysian market while strengthening its presence on e-commerce platforms.
Competitive Edge
11. The company set up its own distribution network in the overseas countries, instead of relying on local distributors, because this gives them more control in terms of distribution and marketing of its products.
12. The company, in my opinion, is considered forward thinking and innovative within a traditional industry. As an
article in Jan 21, the company actually worked with A-star to digitalized its factory operations.
13. Based on my research on 12 Jun 21 at a SS store, the pricing and the photos taken:
A table is computed:
In my opinion, despite a higher price, Golden Bridge stands out as the sole luncheon meat produced/manufactured in Singapore.
Risk
14. Competition &ndash Just solely based on the table above, we can see that there are already numerous competitions in this ready-to-eat and ready-to-cook food segment.
15. One of the main questions is whether the company can sustain the grow in revenue in the post pandemic era.
Conclusion
To start off, I did not apply for the shares thru the ATM during the IPO application phase because 1 million shares for public offer is just too little. But I remain interested because of &ldquo recurring&rdquo revenue and its growth plans.
In my opinion, the risks stated above could be mitigated as (1) the company stands out from the crowded space as a product manufactured in Singapore (okay, I am biased here. But you get my point) and (2) We can always look back to the revenue in FY18 and FY19 for the view of a non-pandemic era kind of revenue. But do note that these revenues have not taken its future growth plan into account.
Eventually, a forward thinking and innovative company will eventually stand out from the crowd.
Part of the Information are taken from articles within The Prospectus, Investor-One website, The Edge and A-star website.
KGI gives their view
https://www.theedgesingapore.com/capital/brokers-calls/kgi-shares-food-thought-ots-holdings-ahead-listing
KGI also notes that OTS intends to expand its business-to-consumer (B2C) customer base through online channels such as Shopee and Lazada. &ldquo Revenue in the online food delivery segment is expected to show an annual growth rate (CAGR 2021-2024) of 8.85%,&rdquo the team points out.
KGI also highlights OTS&rsquo push for further overseas sales, based on its existing successful business model in Malaysia. &ldquo Based on geographical sales, Malaysia sales increased from S$1.4mil in 2018 to S$2.3mil in 2019 (67%), and further rising to S$7.4mil in 2020 (212%),&rdquo the team notes.
OTS Upcoming IPO/ What you should know about the company
OTS&rsquo s four business segments in detail
OTS&rsquo s revenue is divided into four business segments &mdash modern trade, where its products are retailed in supermarkets general trade, where the products are retailed in wholesalers and convenience stores as well as provision shops food services, where the products are sold to F& B players and the hospitality sector and others, which includes overseas customers via export sales and to customers through business-to-customer (B2C) or business-to-business (B2B) arrangements with e-commerce platforms.
The company&rsquo s largest revenue contributor is from the general trade segment, which accounted for 41% of its overall revenue for FY2020. This was followed by modern trade which contributed 32% of revenue, food services at 18% and others at 10%.
Although sales have enjoyed consistent growth despite the Covid-19 pandemic, OTS does not generate much recurring revenue from its clients. For instance, supermarkets are only required to sign a one-year agreement to carry its brands. NTUC Fairprice and Sheng Siong are some of OTS&rsquo s major customers, with sales from both supermarket operators contributing some 26.4% of overall revenue.
The way CFO Toh Kiam Hwee sees it, OTS&rsquo s brand&rsquo s reputation is its recurring revenue. &ldquo As long as we manage our brand and quality, there will definitely be demand for our products and when all the demand comes in, it will be our recurring revenue,&rdquo he says.
Currently, OTS is largely present in the Singapore and West Malaysia markets with two manufacturing facilities in Singapore and one in Indonesia. Having built its market here, OTS plans to mark out its next growth phase by going deeper and wider into the regional markets.
When OTS first entered the Malaysian market, it did so by setting up its own distribution network instead of relying on local distributors.
The way Bee Chip sees it, distributors will not care as much about the brand as themselves. &ldquo We wanted to rely less on distributors while increasing the competitiveness of our products in the market,&rdquo he says, adding that by doing so, OTS gains better control in terms of distribution and marketing of its products.
&ldquo After our success in Malaysia, we studied the Philippines market and realised that we can do the same &mdash set up our own subsidiary there to handle our brands, do the importation and the distribution,&rdquo adds Bee Chip, who notes that there is only so much a third-party distributor will do to help with the product&rsquo s marketing and branding, as most are only focused on profit margins.
OTS&rsquo s subsidiary in the Philippines has already been set up and distribution in the Philippines market will begin by the end of this year. The market is expected to make its maiden contribution to the company&rsquo s FY2022 results.
Planning the next moves
OTS is also jumping onto the plant-based meat bandwagon and is about to launch its brand new range of ready-to-eat plant-based meat products.
&ldquo Plant-based protein has been gaining demand in the market recently and Covid-19 has accelerated this demand,&rdquo says Chew Yong. &ldquo In the market now, most of the plant-based meat products are frozen and do not have a long shelf life. They also have to be cooked, which takes away the convenience. But our R& D team has formulated a canned ready-to-eat plant-based meat product that can be kept for about three years. This shows the strength and capabilities of our R& D team.&rdquo
The aim is to launch its first plant-based luncheon meat by early 2022.
Although OTS admits these products will be more expensive than its regular meat products, it has yet to finalise its pricing, which will be dependent on the raw materials, recipe and economics of scale. &ldquo We are not trying to make people switch from eating meat to plantbased food. That is not our objective. Instead, we want to cater to the people, a whole other market, who do not eat meat for whatever reasons,&rdquo says CFO Toh.
Looking forward, apart from planning to venture into the Philippines and launch its new plant-based meat products, it also intends to continue marketing its different brands to target various consumer price points and expand its presence. For instance, OTS intends to expand its footprint in Malaysia by entering the East Malaysian market while strengthening its presence on e-commerce platforms.
To further expand its overseas footprint, OTS has established and started its Indonesian operations in 1H2020 through its associated company PT Delta Bridge Foods that manufactures non-Halal Chinese sausages for distribution in Indonesia. The company intends to expand the product range offered by Delta Bridge
Asia' s consumption patterns driven by sustainability and diversity: McKinsey
WED, JUN 09, 2021 - 1:17 PMUPDATED WED, JUN 09, 2021 - 13:36
ASIAN consumers are set to account for half the world' s growth in consumption, amounting to some US$10 trillion by 2030, according to a research study from McKinsey Global Institute.
But businesses hoping to tap this golden opportunity will face challenges of shifting preferences, demographics and diversity, the report warned.
Gaping differences within consumer demographics, due to the deep inequalities plaguing the region, will force businesses to re-evaluate their strategies.
For example, while there are 70 million seniors mostly in advanced Asia with relatively high incomes, there are twice more (165 million) seniors mostly in frontier and emerging Asia who may live on less than US$11 a day.
Different levels of comfort regarding online consumption will also force businesses to stratify their online and physical presence accordingly.
Digital natives - those born between 1980 and 2012 - will account for over a third of Asia' s consumption. While 70 per cent of them are very confident of meeting their financial goals, they are also more likely to take out consumer loans to finance new experiences.
While this signals more enthusiastic consumption, questions of rising income and available credit will determine if this trend will continue.
The report also noted that because of the region' s susceptibility to climate disruptions, sustainability and the environment will be top concerns for consumers. They will be more inclined to consume responsibly and sustainably, even if this means paying a slight premium.
As Asian consumers continue shifting their behaviour, preferences and consumption, companies serving these markets will have to adapt. This will determine which companies will be the " rising stars of the next decade" , according to the paper.
What do you think of this guys? The global halal market is a boon to OTS?!
Tapping the Muslim market
Singapore is well placed to make its mark on the global halal economy. Are local businesses ready to make the leap?
SINGAPORE looks like a market to watch in the global halal economy. Last year, the Republic climbed to 15th place in the Global Islamic Economy Indicator index, after going unranked previously - no mean feat for a country where Muslims make up 15 per cent of the resident population.
That is good news for local businesses with an eye on the international Islamic market, which will be worth US$2.3 trillion by 2024, the State of the Global Islamic Economy (SGIE) report from business consultancy DinarStandard and online news outlet
SalaamGateway.com showed.
Consumer research firm Euromonitor International noted that for halal-certified packaged food and drinks alone, Indonesia clocked US$25 billion in sales in 2018, while China accounted for US$11.7 billion and the Philippines for US$3.1 billion.
Says Fara Abdullah, managing director of Singapore-based mobile app startup BitsMedia: " More and more, we' re seeing that investors are starting to realise that the Islamic community is underserved. There is a gap, whether it' s big or small businesses &hellip and they' re starting to look to see how they can move into this area."
Serial entrepreneur Heikal Gani, who ran lifestyle businesses in Canada and China before returning home to Singapore during the Covid-19 pandemic, also notes that there are only so many people living on the one island: " We were conscientious in the beginning to make sure that our markets were not limited to Singapore."
But are small and medium-sized enterprises (SMEs) ready to make the leap abroad to carve a slice of the pie?
Ready to eat
Singapore comes second place in the halal food segment of the Global Islamic Economy Indicator index, and third place in both pharmaceuticals and cosmetics, and media and recreation.
In fact, food and beverage (F& B) is the dominant industry in the halal economy. It is both the largest non-finance segment and also the fastest-growing, said AT Kearney partner Hemanth Peyyeti.
Nurul Hidayah Abubakar, the Islamic Religious Council of Singapore (Muis) halal certification strategic unit' s assistant head of assurance and enforcement, also told a conference in November last year that " at present, our halal certification' s scope is focused on the food and beverage industry" . Singapore had 4,385 halal-certified premises in 2019, of which 19 per cent were manufacturers, Muis statistics showed.
Jumping on the bandwagon is ngo hiang maker Hock Lian Huat Foodstuff Industry (HLH), founded in 1928, which cottoned on to the size of the global halal market in 2019. It is now set to open a halal-only factory in August for seafood products, under its internationalisation strategy.
" The new factory was registered as halal because we' re seeing how the global halal market is getting larger. Being halal-certified, we can sell to halal and non-halal markets, making our business more complete," says managing director William Tan, who aims for exports to make up three-fifths of sales in the next two years.
" More importantly, there is increasing demand from the halal market."
Norzulkarnien Nor Mohamad, Islamic banking head at Maybank Singapore, notes a significantly high demand for halal food products from countries with large Muslim populations: Saudi Arabia, the United Arab Emirates (UAE), Egypt, Turkey, Pakistan, Indonesia and Malaysia.
Still, Dewi Hartaty Suratty, chief executive of Muis' business development arm Warees Halal, advised conference attendees last year that companies must stand out in markets where all products are already halal.
" Of course, consumer habits are also changing &hellip With more working mothers, for example, it has spurred companies to produce more ready-to-eat meals and even pre-mixes, to make preparation of food even easier," she remarked.
For now, food science associate professor Siti Noorbaiyah Abdul Malek from the Singapore Institute of Technology says that food exports are still limited to " kinds of products that can be easily halal-certified" , such as oils or pre-packaged drinks.
But she adds that " I' ve seen some movement in the frozen food sector" , such as sales of laksa and chicken rice to export markets in Europe.
The development of alternative proteins is another emerging trend on the halal food scene, says Prof Siti. She points to cultured meat, as well as algae and plant and mushroom proteins, as some examples.
Meanwhile, Emil Fazira Kamari, senior research consultant at Euromonitor, adds that " Singapore has a lot of potential to value-add product segments" in up-and-coming areas, such as milk and meat alternatives.
Tee Yih Jia Food Manufacturing, which is behind brands such as Spring Home, is one such innovator. The frozen food company entered the halal market in 1977 - eight years after opening - and recently launched plant-based line ALTN in 2020.
" The halal segment is a highly competitive market," notes general manager Laureen Goi. " Consistent quality and food safety is our winning factor."
She says the company is seeing annual sales growth of 20 per cent to 25 per cent, fuelled in part by how exports make up nine-tenths of turnover.
Other opportunities that Ms Goi identified include the rise of Muslim travellers worldwide: " Most food service groups are moving towards purchasing only halal products. For example, sales of roti prata for the Western market have increased by almost 30 per cent to 40 per cent since 2018."
https://ots-holdings.com/
their luncheon meat and taiwan sauages are my family' s fav
There is indeed growing demand for plant-based food products
Growing interest in plant-based meat
The Covid-19 pandemic has spurred the growth of plant-based meat amid food supply disruptions and people' s drive to make healthier food choices
https://www.straitstimes.com/lifestyle/food/growing-interest-in-plant-based-meat
https://www.globenewswire.com/en/news-release/2021/02/11/2174464/0/en/Plant-Based-Food-Market-Size-to-Hit-USD-37981-6-Million-Revenue-by-2027-at-10-20-CAGR-Forecasts-Market-Research-Future-MRFR.html
Went to NTUC and SHeng SHiong to check out OTS brands, Golden Bridge and KELLY' S, their prices are generally higher than others (which are CHina-made), which is probably due to strength in their branding and product preference by consumers..
The shape of their products are also different which are in rectangular shape.
Went to check out their prospectus lodged and there is good reasons for consumers why their products are in rectangular shape. These rectangular cans are made of aluminium instead of tin, which is environmentally friendly as aluminium is recyclable. In addition, it is less prone to rusting, provides better heat permissibility to the meat and thereby improves the product texture, requires less storage space, and provides us with better product differentiation from our competitors in China which typically produce canned meat in round cans
***
The pandemic will no doubt be a boom for OTS. Most modern families dont usually cook, for a couple of reasons: no time, lazy to wash up after cooking up a spread or they simply don' t know how to. Unless they have the good fortune of parents or in-laws living with them, they will usually get food from outside (for now they have to settle for packed food delivered or self-collected).
***
richie_rich ( Date: 23-May-2021 12:54) Posted:
OTS HOLDINGS IPO
The pandemic will no doubt be a boom for OTS. Most modern families dont usually cook, for a couple of reasons: no time, lazy to wash up after cooking up a spread or they simply don' t have time too. Unless they have the good fortune of parents or in-laws living with them, they will usually get food from outside (for now they have to settle for packed food delivered or self-collected).
If they get sick of dining out, they will most likely settle for easy-to-cook meals eg instant noodles, canned or frozen food.
If you google for Golden Bridge or Kelly' s foods , you will find a variety of canned luncheon meat and other ready-to-eat/ ready-to-cook packaged food like JJa Jiang La Mien, stewed pork and sausages. I am equally impressed with their halal offerings eg. canned shredded chicken, pepper chicken meat loafs, chicken luncheon.... the list goes on. The buying power of the Muslim and Malay community is not to be underestimated.
For these reasons, I would put a buy call on the counter and hopefully get to subscrible for its shares. Econ, the other IPO offering did very well. I would be expecting a stellar performance on OTS' s debut.
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OTS HOLDINGS IPO
The pandemic will no doubt be a boom for OTS. Most modern families dont usually cook, for a couple of reasons: no time, lazy to wash up after cooking up a spread or they simply don' t have time too. Unless they have the good fortune of parents or in-laws living with them, they will usually get food from outside (for now they have to settle for packed food delivered or self-collected).
If they get sick of dining out, they will most likely settle for easy-to-cook meals eg instant noodles, canned or frozen food.
If you google for Golden Bridge or Kelly' s foods , you will find a variety of canned luncheon meat and other ready-to-eat/ ready-to-cook packaged food like JJa Jiang La Mien, stewed pork and sausages. I am equally impressed with their halal offerings eg. canned shredded chicken, pepper chicken meat loafs, chicken luncheon.... the list goes on. The buying power of the Muslim and Malay community is not to be underestimated.
For these reasons, I would put a buy call on the counter and hopefully get to subscrible for its shares. Econ, the other IPO offering did very well. I would be expecting a stellar performance on OTS' s debut.
Just saw this interesting IPO that is coming onto catalist soon. And I think the dicussion is already started here.
It seems to have amazing financials.
" ..The group reported profit of $2.9 million and revenue of $21.1 million for the 1HFY2021.
In the FY2020, the group saw profit of $3.6 million and revenue of $34.5 million..."
That is great for a food manufacturer. In fact, if we extrapolate there will be at least a 23.5% increase in revenue this year.
Will be watching out for more news on it.
https://www.theedgesingapore.com/news/ipo/food-manufacturer-ots-holdings-files-ipo-prospectus-list-sgx%E2%80%99s-catalist-board
Consumer staples (Like Wilmar, Food Empire and Japfa) have been defensive and resilient even amid the pandemic, delivering strong results and value for shareholders.
OTS Holdings will be another good proxy in the consumer staples industry with their strong brand portfolio and established production capabilites...
OTS Holdings looking to tap the increasing demand for plant-based products
BRAND builder and food manufacturing group OTS Holdings had on Thursday lodged a preliminary prospectus for a Catalist listing on the Singapore Exchange.
Established in 1993, the company' s core business is in manufacturing ready-to-eat and ready-to-cook meat products with key markets in Singapore and Malaysia. It currently has manufacturing facilities in Singapore and Indonesia.
Its portfolio of brands include Golden Bridge, Kelly' s, Golden Lion and Orchid. It has also targeted the growing halal food market through retail brand El-Dina and food service brand Kiziq through its subsidiary Ellaziq Singapore, a halal food specialist.
Among OTS' s key customers are NTUC group and Sheng Siong Supermarket, which accounted for 10.3 per cent and 6.7 per cent respectively in revenue for H1 FY2021.
The company said in the prospectus that it plans to use proceeds from the IPO (initial public offering) to improve and expand production efficiency and capacities through the acquisition of new machineries and equipment. In addition, proceeds will be used to develop new products, research and development general working capital purposes.
OTS is also eyeing an expansion into the Philippines, where there is an expansion of modern food retail markets such as supermarkets and convenience stores in both urban and rural areas with consumers demanding more convenience and flexibility, said the group.
For H1 FY2021, it reported a profit of S$2.9 million, up from S$795,411 over the same period the previous year. Revenue for H1 FY2021 rose to S$21.1 million from S$14.6 million the previous year due to the increase in revenue from all business segments.
" With the rising awareness of food security in Singapore, there is an increased awareness and importance placed on shelf-stable products, and we expect our products to benefit from such awareness in Singapore," said the group in its prospectus. It is also looking to tap the increasing demand for plant-based products as sustainable protein alternatives through the research and development of its own shelf-stable, plant-based food products.
Upon successful listing, OTS will be the second listing on the Catalist board this year. Private nursing home operator Econ Healthcare had relisted on the Catalist board in April, ending its first day trading 3.6 per cent higher than its IPO price of S$0.28.
SAC Capital is the sponsor, issue manager, underwriter and placement agent.
OTS Holdings, Household Brands Owner and Food Manufacturer, files IPO prospectus to list on SGX&rsquo s Catalist board
OTS Holdings, a brand builder and food manufacturing group in Singapore, plans to list on the Catalist board of the Singapore Exchange (SGX).
The company, which has a strong niche in ready-to-eat and ready-to-cook meat products, has filed its preliminary prospectus with the Monetary Authority of Singapore (MAS) on May 20.
Its flagship heritage brand Golden Bridge and Kelly&rsquo s have become established household names in its key markets of Singapore and Malaysia.
OTS Holdings was established in 1993, and now has an &ldquo established track record&rdquo of over 27 years in the industry.
&ldquo We believe we are one of the largest meat product manufacturing companies in Singapore with the capability to manage and process as many as four product categories &ndash chilled, frozen, dried and shelf-stable ready-to-eat and ready-to-cook meat products &ndash within one single facility,&rdquo says the company via a press release on May 20.
The group reported profit of $2.9 million and revenue of $21.1 million for the 1HFY2021.
In the FY2020, the group saw profit of $3.6 million and revenue of $34.5 million.
