Singapore IPO – Katrina Group

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singapore ipo listing

Katrina Group has just filed for its proposed initial public offering (IPO) and listing on the Catalist board of Singapore Exchange. Placement for the shares will close on 22 July and trading will start on 26 July. Katrina seeks to raise $7.5 million by issuing 35.8 million new shares (15.4% of shares outstanding post-IPO) at price $0.21 each; putting the group’s market capitalisation at $48.6 million. Katrina Group aims to distribute up to 60% of its FY2016 net profit to shareholders as dividends.

Katrina Group is a food and beverage enterprise which is known probably for some of its famous chains such as So Pho, RENNthai and Bali Thai. It operates a total of 32 branches in Singapore and 2 restaurants in China under 9 unique dining brands and styles.

katrina group brands

Its strategy in the extremely competitive local environment is to cater to a wide group of consumers with different cultured cuisines, such as Indonesian and Thai. It also has a healthy mix of eateries which both catered to affluent and economical patrons, as well as different eating patterns (4 of Katrina’s brands are Halal-certified). The Group wishes to use the IPO proceeds to launch an online food ordering and delivery system, increase the number of “Halal” certified outlets and expand into new regional markets.

We compared Katrina’s financial ratios against its peers listed on the SGX. We have chosen a few and taken some of the notable figures from their latest earnings reports.

  Soup Restaurant Japan Foods Jumbo Katrina (Post-IPO)
PE Ratio (ttm) 39.8 16.6 39.3 11.4
Price/NAV 5.14 2.03 7.13 4.04
Pretax Profit Margin 2.74% 7.42% 12.33% 9.77%

 

PE Ratio (Good)
Katrina has the lowest PE amongst its peers. Its PE is also half the average PE of its industry.
Most listing companies would often take reference to this figure as it is the most recognized financial ratio, the PE ratio. Referred as how much are you paying for each dollar of earnings, most investors take this number as the affordability of the stock. Generally, the lower the ratio is, the better it is.

Price/NAV (Average)
Katrina’s price/NAV (Net Asset Value) is in the middle range amongst its peers.
While Price/NAV is not a very indicative guide to service industry like F&B, I feel it is important to know the net equity amount which you can get if the company fails. However, this is to be taken with a pinch of salt due to subjective salvage costs.

Pretax Profit Margin (Good)
Katrina’s pretax profit margin is also on the higher side of its industry’s average.
Pretax Profit Margin is a good figure to know if the company is performing better than its competitors in terms of earning potential.

Overall Score
Comparing Katrina Group’s financial figures against those of its peers, Katrina seems to be priced fairly or slightly undervalued. Its high pretax profit margin and low PE ratio makes it a good catch among its peers. While its Price/NAV is average, it has a fairly high pretax profit margin and low PE. This might mean that Katrina is able to generate good returns while employing small amount capital and is able to distribute the excess profits back to shareholders.

 

All in all, the F&B sector is an extremely competitive one. However, the one that is able to produce consistent or growing earnings are usually those that possesses a unique taste for customers. Furthermore, most successful eateries are usually privately owned. Hence, based on history, this sector commands a premium on its listing price.