May 7 update:

We affirm our opinion on Monde Nissin, which is that it is indeed too expensive at the current listing price. Their competitors are trading at an average of 11.9x (2019). We’re using 2019 as a baseline since 2020 was a pandemic year, which prevented people from stockpiling supplies. Monde Nissin value is approximately Ph10.67 Pesos and, we are aiming to lock in t a cost of Ph P9.70 to PhP9.25 to Ph P9.75 (10-15% upside).

https://pinoydesk.com/monde-nissin-gets-investor-commitments-for-1-b-ipo-at-13-50-share/

Company Background

Monde Nissin Corp. is a global food and beverages company with market-leading products in the Philippines. The Company is also in the meat alternatives business through Quorn.

CompanyMonde Nissin Corporation
RatingSubscribe if priced below PhP10
TickerTBA
Offer PricePHP 17.50
Offer size72,450 million*
Shares Outstanding17,969 million*
Market Cap314,451 million*
Free Float23 %*
Offer PeriodMay 17, 2021 (tentative)
Listing DateMay 31, 2021 (tentative)
Issue ManagerBDO Capital, BPI Capital, FMIC
*w/ overallotment
Top Shareholders
Hartono Kweefanus29.30%
Hoediono Kweefanus6.60%

Summary

Monde Nissin Corp. is a multinational food and drinks organization with market-leading brands in the Philippines. Via its subsidiary Quorn, the company is also involved in the meat substitutes industry.

A Look at the Industry

From 2016 to 2020, the Philippines’ household spending on food and beverages per capita increased at a compounded annual growth rate (“CAGR”) of 4.2 percent. According to Euromonitor, the market would expand at a faster pace from 2020 to 2025, with a CAGR of 7.1 percent. Meanwhile, global meat replacement revenues are expected to reach $8 billion by 2020, with the United Kingdom and the United States responsible for 8.8 percent and 21.3 percent, respectively. According to Barclays, the global meat replacement industry would be worth up to $140 billion by 2029.

Proceeds Utilization

The Company expects to collect PhP60.5B in net proceeds with a bid price of PhP17.50. The majority of the proceeds would be used to fund the company’s capital spending (“capex”) plans. The Company’s key projects right now are the completion of its Malvar, Batangas plant, the launch of a new healthy noodles range, and the expansion of capability and development of new items for its meat substitute market. The remaining funds will be used to redeem the convertible note to repay the loans.

Use of ProceedsAmountTiming
Capex26,519.0 M2021-2023
Redemption Convertible Note17,308.0 M2Q 2021
Repayment of Loans16,689.4 M2Q 2021
Estimated Net Proceeds60,516.4 M 

Recommendation

Indicators201820192020
EPS (PhP)*0.110.320.41
P/E ratio (x)154.1453.9642.83
BVPS (PhP)*1.291.291.48
P/B ratio (x)13.5413.5411.85
Return on Equity (%)11.75%28.63%32.42%
Revenue Growth (%)3.29%3.81%
Operating Income Growth (%)30.72%8.10%
Net Income Growth (%)185.64%25.98%
*post offer outstanding shares w/ overallotment

At the maximum bid price of PhP17.50 and considering a completely subscribed IPO with overallotment, the Company would trade at 42.8x 2020 PE, a substantial premium primarily based on relative valuation. According to GICS data, the regional PE average for the food products industry is 26.6x. To match the geographic coverage, the MNC’s price should be P10.88, or it should increase its 2020 EPS by 61 percent, resulting in a PE of 26.6x at PhP17.50. As a result, based on our relative assessment, we suggest subscribing to the IPO if it is priced less than PhP10.

Material in this article is obtained from sources we believe to be reliable, but its reliability or precision cannot be guaranteed. This is for the sole purpose of providing details and does not provide an offer from us to buy or sell securities mentioned in this document.

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