JB Foods

[freedom]

Petra is more than just a cocoa processor, it has its own brand consumer product as well. In a way, it is also competing with nestle/kraft food etc.

[propertyinvestor]

Im incline to think that Nestle would be more willing to buy from JBCocoa or Guan Chong compared to Petra since Petra is a competitor.

[sgd]

IPO all is balloting. you subscribe 350 lots they will deduct 105k immediately from your bank account even tho likely you give ard 10 lots. They use the money earn a few coins then later after give you 10 lots or so and return the excess balance after deducting for the 10 lots.

IPO cannot play lah too danger leow u dunno meh? Many people playing this game IPO first day only all throw, all just want to earn a few coins to buy kopi

so first week is always look like big lao sai sell off.

if want to buy must wait after 3 month or 6 month later when punters no more interested and moved on to something else.

[propertyinvestor]

IPO all is balloting. you subscribe 350 lots they will deduct 105k immediately from your bank account even tho likely you give ard 10 lots. They use the money earn a few coins then later after give you 10 lots or so and return the excess balance after deducting for the 10 lots.

IPO cannot play lah too danger leow u dunno meh? Many people playing this game IPO first day only all throw, all just want to earn a few coins to buy kopi

so first week is always look like big lao sai sell off.

if want to buy must wait after 3 month or 6 month later when punters no more interested and moved on to something else.

I find the price of 30c and PE 6 to be a bargain for an IPO stock. They could have price it much higher actually.

[propertyinvestor]

Last Day of application is today

[shanrui_91]

"Key risks

The biggest challenge for JB Foods is to prevail over its competitors.

Malaysia is the 5th largest Cocoa grinder in the world, with 7.8% of the global grinding volume in 2010-11.

The company faces competition from Malaysia-based cocoa processors such as Barry Callebaut Malaysia, Delfi Malaysia, Guan Chong Cocoa Manufacturer Sdn Bhd, and Malaysian Cocoa Manufacturing Sdn Bhd.

JB Foods faces competition from other large international players as well.

Some of the international players such as Archer Daniels Midlands Co. and Cargill Inc. have an integrated business model, from cocoa production to grinding and end product manufacturing.

Moreover, these competitors have greater financial and other resources to weather any downturn, unlike JB Foods.

Cocoa butter, which made up 41% of its FY11 revenue, is used as an ingredient in manufacturing of chocolate and related products.

But because cocoa butter is relatively costly, it has been substituted by vegetable fats from other sources such as palm oil, coconut and illipe, especially in less affluent markets such as China, India, and Southeast Asia.

This trend of substitution of cocoa butter is a big threat for the company, as Asia made up 28.5% of its revenue in 2011.

The Asian market for chocolate and related products is expected to grow substantially as the population grows richer and is willing to spend of luxurious consumption.

The risks are expected to get bigger once the company adds another 40% processing capacity at its Malaysian plant later this year.

The company does not appear to have plans to have plans to produce these substitutes, despite robust availability of raw materials like palm, coconut, and so on.

JB Foods Ltd’s top six suppliers sold 70% of the goods and services it bought in 2011.

The company is exposed to supply disruptions as its supply contracts are short-term, generally less than 12 months.

Also, the pricing of cocoa beans, a key raw material, is dependent on agricultural and international factors which might drive prices significantly higher.

Another important aspect of its business is the processing yield of cocoa beans.

In other words, it refers to the quantity of final products derived from the processing of cocoa beans.

In 2011, JB Foods managed a processing yield of 79.4% on its raw materials.

Though this was higher than 78.6% in 2010 but it was lower than 79.7% in 2009.

The processing yield depends on the quality of cocoa beans purchased by the company.

Any bad lot of cocoa beans can reduce the productivity and increase per unit cost of the company’s products.

JB Foods is also exposed to foreign currency risks, as it earned 48.2% of its 2011 revenue in US Dollars and 46.9% of revenue in Pound Sterling.

Also, 68.9% of its purchases in 2011 were in US Dollars and another 28% was paid for in Pounds.

Therefore, the company is exposed to foreign currency fluctuation risk.

It has tried to hedge against this, but actually lost RM2.3 mln in fair value of its foreign currency derivative contracts in 2011.

And from now on, the company will have to translate its financial statements into Singapore Dollars from Malaysian Ringgit, which will expose it to further currency translation risks.

JB Foods earned more than 40% of its 2011 revenue from the markets of North America and Western Europe.

Such high dependence on the two troubled economies of the world exposes the company to risks of dramatic slowdown in demand for chocolate and related products which will eventually impact demand for the company’s products.

The company allows a credit of up to 90 days to its customers.

In 2011, trade receivables surged over 100% compared to a year earlier.

Its financials are always at risk of default by its customers.

JB Foods will be controlled by its Chairman and his family, as they own JBC Group, which will hold 61.2% of the company ownership after the IPO.

Therefore, the business is heavily dependent on their skills and expertise in managing the company.

JB Foods Ltd’s effective tax rate was 24% compared to only 10.7% in 2010.

This was due to expiry of tax concessions at its Malaysian processing facility in 2010.

Also, after its incorporation in Singapore in January this year the company will also be subject to 17% corporate tax in Singapore.

The additional tax will further hit the distributable profits of the company.

Malaysian government has proposed a Goods and Service Tax (GST).

The prospectus says the company is uncertain of any potential impact of the legislation on its profitability.

Therefore, the GST might have an adverse impact on the financial performance of the company, once implemented.

Investor Central. We ask the questions that need to be asked:
1. The company will use S$8.3 mln of the IPO proceeds to repay its short-term loans taken for expansion of capacity in Malaysia. One of the loans is due for repayment in next couple of months. Why did it not borrow funds for a longer period in the first place? Did it raise IPO only because it couldn’t refinance these loans?
2. Cash from operations fell dramatically in 2011 due to a steep rise in its trade receivables. Why did trade receivables rise more than 100%, even as revenue grew only 37%? Are its customers having troubles in paying their dues?
3. While the company is using a part of IPO proceeds to repay loans for expansion, it could have easily repaid them with the dividend declared in 2011 alone! Why didn’t it do so as the promoters were already drawing salaries from the company?
4. The management intends to distribute at least 30% of its profits in 2012. But it doesn’t follow a fixed dividend policy. In the last two years, the company has distributed 70.6% and 58.8% of net profits as dividend. Why such drop in dividends for 2012?
5. JB Foods was established in Malaysia 30 years ago. By incorporating and listing in Singapore, it will end up with greater tax liability and currency translation risk. So, why did it not seek a listing on Bursa Malaysia instead?
6. Given its foreign exchange exposure, and the strengthening ringgit, it's no surprise the company tried to hedge its forex exposure. But it doesn't look like it's getting it right. Why did the company lose RM2.3 mln in fair value of derivative financial instruments in 2011?
7. The prospectus states market share figures for 2010. What was its market share in Malaysia in 2011? Why didn’t the prospectus share the latest figures?
8. If palm oil is such a growing competitor against cocoa, why not expand into palm oil processing?
9. The family that started JB Foods owns its stake in the company through its family holding firm JBC Group. The former name of JBC Group was Guan Chong Food Industries, a remarkably similar name to Guan Chong Cocoa Manufacturing Sdn Bhd, which is listed in the prospectus as a competitor to JB Foods. So the question is: does the family own and/or control a direct competitor to JB Foods? If so, how can we be sure the family will act in the best interests of JB Foods?
10. How is demand from its major markets Western Europe and the US holding up, in view of the ongoing debt crisis?
11. JB Foods plans to setup a laboratory by 2014. How much does it plan to spend on its R&D annually?
12. How certain is the management about exercising the call options for PT Koko and Kakao GmbH? What is the value of these two companies and how much will JB Foods spend if it were to acquire these companies?
13. The company’s ‘other expenses’ for 2010 include a listing fee of RM662,746. What is this item?
14. The company sold some plant and equipment at a loss of RM86,387 in 2011. Which assets did it sell?"

http://www.investorcentral.org/show_text...xtid=15567

[freedom]

a few questions to Investor Central's questions:

1. Why would they translate their financial from Malaysian RM to Singapore Dollar? It does not make any sense at all.

2. The Co registered in Singapore is probably just a holding company only, what's the profit to be taxed in Singapore?

[shanrui_91]

a few questions to Investor Central's questions:

1. Why would they translate their financial from Malaysian RM to Singapore Dollar? It does not make any sense at all.

2. The Co registered in Singapore is probably just a holding company only, what's the profit to be taxed in Singapore?

it is stated in the prospectus

1) "In addition, as our reporting currency is in RM, the financial statements of our Company which is recorded in its functional currency (being S$) will need to be translated to RM for consolidation
purposes. As such, any material fluctuations in foreign exchange rates at the end of each financial year will result in translation gains or losses on consolidation. Any such translation gains or losses will be recorded as translation reserves or deficits as part of our shareholders’ equity."

I am not too sure what it means by functional currency and reporting currency

2)"Our Company was incorporated in Singapore on 3 January 2012 under the name “JB Foods Pte. Limited” as a private limited company under the Companies Act as an investment holding company. On 3 July 2012, our Company was converted into a public company limited by shares and our name was changed to “JB Foods Limited”. To facilitate the listing of our Company on the Official List of the
SGX-ST, the Restructuring Exercise was undertaken to make JB Cocoa our wholly-owned subsidiary."

Singapore's taxation is also mentioned in pg 186 and I am not too sure how the structure will affect taxation. The subsidiary will definitely be taxed in Malaysia but what about the holding company in Singapore? Any tax expert around?

[dzwm87]

IMO, I think functional currency is the main currency which the business undertakes, while reporting currency is the one reported under their financial statements.

For instance, if a S-chip whose entire business is based in China (i.e. functional currency = RMB), then it will make no sense in reporting their currency in SGD as their earnings will take unnecessary changes due to FX risk.

[freedom]

a few questions to Investor Central's questions:

1. Why would they translate their financial from Malaysian RM to Singapore Dollar? It does not make any sense at all.

2. The Co registered in Singapore is probably just a holding company only, what's the profit to be taxed in Singapore?

it is stated in the prospectus

1) "In addition, as our reporting currency is in RM, the financial statements of our Company which is recorded in its functional currency (being S$) will need to be translated to RM for consolidation
purposes. As such, any material fluctuations in foreign exchange rates at the end of each financial year will result in translation gains or losses on consolidation. Any such translation gains or losses will be recorded as translation reserves or deficits as part of our shareholders’ equity."

I am not too sure what it means by functional currency and reporting currency

2)"Our Company was incorporated in Singapore on 3 January 2012 under the name “JB Foods Pte. Limited” as a private limited company under the Companies Act as an investment holding company. On 3 July 2012, our Company was converted into a public company limited by shares and our name was changed to “JB Foods Limited”. To facilitate the listing of our Company on the Official List of the
SGX-ST, the Restructuring Exercise was undertaken to make JB Cocoa our wholly-owned subsidiary."

Singapore's taxation is also mentioned in pg 186 and I am not too sure how the structure will affect taxation. The subsidiary will definitely be taxed in Malaysia but what about the holding company in Singapore? Any tax expert around?

my guess is that there is little or none profit in the Singapore holding company, so the Singapore tax should not be a big question.

I am no tax expert. please correct me if I am wrong.