SINGAPORE: Home-grown food court operator Koufu fizzled in its trading debut on the Singapore Exchange’s (SGX) mainboard on Wednesday (Jul 18), closing flat at its initial public offering (IPO) price of S$0.63 apiece.
The counter got off to a good start with an opening price of S$0.65, but soon lost momentum after hitting an intra-day high of S$0.66 and gave up gains to end its first trading session at S$0.63.
It was among the most actively traded stocks for the day with about 34 million shares changing hands.
The broader Straits Times Index (STI) also pared earlier gains to finish little moved at 3,240.50, up just 0.03 per cent or 0.86 points. Gainers slightly outnumbered losers by 189 to 182.
With a market capitalisation of about S$350 million, Koufu will boost SGX’s consumer cluster to a total of 152 listings with a combined market capitalisation of more than S$135 billion, the bourse operator said in a news release.
Mr Simon Lim, SGX’s head of equity capital market for sectors, said this will “provide investors with the opportunity to invest in one of Singapore’s most established household F&B brands”.
"We are excited to be the Group’s choice listing platform as it seeks to strengthen its presence in Singapore and overseas, drive productivity through innovation and automation, as well as expand into the online food ordering and delivery space," he added.
Founder-CEO Pang Lim described the listing as a “strong vote of confidence” for the 16-year-old company, as well as a “recognition” of its track record and growth plans.
Koufu said it received “strong support” from both institutional and retail investors at the close of its IPO on Monday noon.
The public tranche of 6.3 million shares was 17 times subscribed, with application monies of about S$67.8 million lodged.
For the placement tranche of 85.1 million shares, it received “strong” indications of interest for about 552.5 million placement shares, with a total value of just over S$348 million.
The valid acceptances for the reserved shares resulted in all 5.5 million being allotted.
Separately, 21 million shares were taken up by three cornerstone investors, namely Maxi-Harvest Group, One Hill Investments and Qilin Asset Management.
Among the future plans outlined in its prospectus, Koufu is earmarking S$30 million of the IPO proceeds for the building of an integrated facility in Woodlands, which will be home to a larger central kitchen and a centralised dishwashing facility.
Some S$5 million will also be set aside for other expansion plans, such as the acquisition of a major stake in a business-to-business bakery. Slated to be completed in the fourth quarter, Koufu said this will expand its bakery, confectionary and hot kitchen food production business.
Apart from new openings in Singapore, including its first food court in a hospital launching this month, Koufu is eyeing overseas expansion by using Singapore and Macau as “springboards” to enter China, Malaysia, Indonesia and Australia.
It has also begun negotiations with several commercial landlords and developers to establish new food and beverage (F&B) outlets in Macau.
At the moment, Koufu manages 47 food courts, 14 coffee shops, 81 self-operated food and beverage (F&B) stalls, a hawker centre in Jurong West and the Punggol Plaza. Outside of Singapore, its presence in Macau comes in form of a food court at Sands Cotai Central, as well as two F&B stalls and an F&B kiosk.
STRING OF F&B LISTINGS
Koufu’s market debut comes on the back of a string of F&B listings last year, including traditional coffee shop operator Kimly, as well as restaurant chains RE&S Holdings and No Signboard Holdings.
Phillip Securities' research head Paul Chew said the performance of Catalist-listed Kimly has been key in attracting F&B operators to go public. Since the IPO last March, the counter has risen 38 per cent after last trading at S$0.345 on Wednesday morning.
“When you have one bellwether stock like Kimly that pulls up the valuation for the whole sector, it will attract other listings,” he told Channel NewsAsia.
Other listings have had less upbeat performances; RE&S Holdings and No Signboard Holdings have fallen 18 per cent and 33 per cent below their IPO prices, respectively, since their debut on the Catalist board in November.
RHB Research analyst Lee Cai Ling explained: “In general, companies’ first-year performance will be lacklustre following its listing as the companies require time to execute its expansion plans. Secondly, the IPO expenses can be quite significant hence dampening the bottom line.”
Mr Chew also noted that market participants are generally concerned about the lack of organic growth among consumer firms though this has helped by the presence of healthy cashflows and decent dividends.
In the case of Kimly and Koufu, the emphasis on serving up affordable food options at coffee shops and food courts means they are “more defensive consumer staples” that will be less sensitive to economic downturns, he added.
Moving forward, Ms Lee expects ongoing trade tensions and slower growth expectations to churn higher volatility in the local stock market. Cautious investors would hence prefer to park their monies with blue-chip companies or defensive stocks, such as consumer staples, she said.
Echoing that, CMC Markets analyst Margaret Yang said SGX-listed F&B operators, including crab restaurant owner Jumbo and Kimly, have registered a negative 2 per cent year-to-date return as of yesterday’s closing. This compared with a negative 4.7 per cent return for the STI over the same period.
“In view of rising trade tensions and uncertainties in the global environment, domestic-focused F&B names are favoured by their defensive nature and stable cashflows,” Ms Yang said.