12 Dec 2021 / by AP Securities (formerly Angping & Associates Securities)
Figaro Coffee Group (FCG): Preliminary IPO Analysis
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SUMMARY OF RECOMMENDATION
Our initial recommendation is to subscribe to the IPO of Figaro Coffee Group, Inc. (FCG) if the offer price is below P1.20/share given the company’s growth prospects.
SUMMARY OF ANALYSIS
Figaro Coffee Group, Inc. (FCG) has received the go signal from the Philippine Stock Exchange (PSE) for its P1.77-billion initial public offering, subject to post-approval conditions. FCG’s IPO will comprise of 1.26 Billion common shares with an overallotment option of 126 Million, with a maximum offer price of P1.28/share. Target offer period is from December 16 to 22, while tentative listing date is scheduled for December 31.
In terms of valuation, we reiterate that the stock is reasonably priced at P1.28/share – trading at an estimated 20.2x Price-Earnings (P/E) ratio assuming an annualized 2021 net income of P230 Million. This is below PIZZA’s historical blended forward P/E mean of 22.2x.
Moreover, around P501.5 Million (33% of proceeds ex-OA) will be allocated to expand its store network across its brands including Angel’s Pizza, Figaro, Tien Ma and TFG Express. Particularly, a chunk of the CAPEX budget is slated to fuel growth of Angel’s Pizza, of which management aims to add 35 new stores by 2024. We note that Angel’s Pizza accounts for 91% of 1H 2021 topline, while the brand’s revenue has nearly grown by three-fold since 2019.
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