Figaro Coffee Group IPO is today!
This is the PSE’s 2nd IPO of 2022, and its first retail food service IPO since Fruitas [FRUIT 1.28] in 2019. Figaro Coffee Group [FCG 0.75] owner, Jerry Liu, is looking to raise P0.77 billion through the sale of 1.023 billion common shares at P0.75/share.
The proceeds will go towards commissary expansion (49%), store openings and renovations (40%), and debt repayment (11%).
Of the money that will go toward store openings, FCG plans to open 61 new locations over the next three years, but only 6 of those are planned to be Figaro Coffee locations; the vast majority of the new locations will be for Angel’s Pizza (35 locations) and TFG Express (18 locations).
The IPO is underwritten by a joint team of Abacus Capital, China Bank Capital, and PNB Capital, with PNB Securities acting as the stabilizing agent for FCG’s stability fund.
Barkadans reported receiving over 80% of their requested allocations; everyone basically received their full requested allocations except for one reader with First Metro Securities. There was one user report of oversubscription (BPI Trade), but no media-based reports of oversubscription.
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More than any other sector, the retail food service industry has had its business model absolutely rearranged by COVID. As I covered in 2020, early analysis from McDonald’s PH [AGI 12.50] and Jollibee [JFC 230.40 0.61%] indicated that the traditional 80% dine-in and 20% dine-out ratio would flip to 80% dine-out and 20% dine-in going forward, due largely to movement restrictions brought on by COVID, but also due to shifts in consumer behavior toward online ordering that were already underway, but which were expected to accelerate due to the pandemic.
The jaw dropping part of the analysis was that these massive quick service restaurant chains expected that change to be more or less permanent.
Here, FCG is listing amid a surge in yet another COVID variant, in an environment that is increasingly dominated by delivery, drive-through, and take-out.
Perhaps that is why the majority of the offering will go toward the expansion of FCG’s commissary, with the bulk of the remainder going toward the delivery-friendly Angel’s Pizza. Coffee, no matter how delicious and addicting, doesn’t have the same dine-out potential.
I don’t have information to know if FCG plans for its commissary to act as a “cloud kitchen” for online orders placed through 3rd party platforms, but simply having this commissary gives FCG the flexibility to head down this path in the future (if it isn’t already).
Pre-pandemic I was extremely bullish on companies in this space, including JFC, McDonald’s PH, and even FRUIT. My bullish sentiment was eviscerated by the unprecedented impact of the pandemic on consumer mobility, demand, and purchasing power.
While the light at the end of the tunnel may be visible, we are still not in a place where it’s possible to assume a return to packed stores all across the Metro anytime soon.
Long-term, I think the macro-economic changes that we’re going through make a great case for delivery-friendly quick service restaurant stocks, but the short term is still quite uncertain.
Remember that feeling we all had just before Delta? Or the feeling after Delta was largely under control? Retail food is not a high-margin business, and these disruptions really do cripple profits in the short term.
Please don’t consider this to be a recommendation of any kind of action on this stock. I don’t have an official position on whether the offering itself is cheap, expensive, or just right relative to the potential gains, and especially whether the risk/reward profile is appropriate for each Barkadan.
That’s an investigation that you’ll need to do for yourself.
I just wanted to talk through my thinking on the IPO out loud, to show my thought process on FCG in particular, and the retail food sector in general. Good luck, FCG!
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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