Financial Highlights

The table below sets out a summary of the Group’s key financial and operational highlights based on the Group’s historical audited combined financial information for the Financial Years and Period Under Review:

1. The revenue grows from RM 58 mil (FYE 2019) to RM 136 mil (FYE 2021). This shows that the company's market share is expanding.
2. The gross profit margin grew from 17.28% (FYE 2019) to 30.66% (FYE 2020) and declined to 27.92% (FYE 2021) Good cost control is also evidence of management ability. (Generally, a GP margin of 20% is considered high/ good).
3. PAT margin is in the range of 7% to 13%.
4. The gearing ratio is 0.75 times (FYE 2021), and the gearing ratio is slightly higher than the standard gearing ratio benchmark. Therefore the company has to maintain its gearing ratio under 0.25 ~ 0.5. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for the Financial Years Under Review are as follows:

According to the details, the top 5 customers are around 93.75%. The company is dependent on the CP All group (CP All, Siam Makro, Ek-Chai Distribution) which contributes 66.31% of all Revenue. This will cause the company involved in high-concentration customer risk which might impact the financial statement if any of the major customers terminate cooperation.

For example, the company lost a major customer, Mega Alliance in FYE 2021 who carried out the distribution of the Group’s product to traditional retailers. However, the company found another customer, and the Group’s products to traditional retailers are now carried out by Valueplus. This is also evidence of the company's ability to manage the crisis.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are around 99.99%. The company business is dependent on the top suppliers namely ChaCha Food Thailand and Jet Voyage, collectively known as QiaQia group, a company listed on the Shenzhen Stock Exchange. However, the company mentioned they are mutually dependent on each other with QiaQia group as they have a long track record and relationship with QiaQia Group for approximately 10 years. Moreover, they have also established a distribution network for ChaCha sunflower seeds and nuts in Thailand. Lastly, they have established a long-term business relationship with major retailers in Thailand, through the established relationships with these retailers, the company was able to obtain feedback for QiaQia’s products in various aspects including types of packaging, pricing as well as flavor and taste.

Industry Overview

According to Vital Factor Consulting’s research, between 2017 and 2021, the revenue of retail activities in non-specialized stores for food, beverages and tobacco grew at a CAGR of 0.2%, where supermarkets experienced the highest CAGR of 4.0%. In 2021, large-scale retailers, small-scale retailers, supermarkets and grocery stores accounted for 47.3%, 38.5%, 10.3% and 3.9% respectively of the retail sales revenue. In 2021, the retail sales revenue declined by 3.2%, due to disruptions in economic activities caused by the COVID-19 pandemic. Among the retailers, supermarkets, grocery stores and small-scale retailers grew by 3.9%, 4.1% and 1.3% respectively while the large-scale retailers declined by 8.5% in 2021.

In 2021, there were 8,442 wholesalers of foods of which 2,989 were wholesalers of other food products not elsewhere classified which include, among others, snack foods (Source: MOC). The following are some distributors of consumer packaged foods including sunflower seeds (shelled or unshelled) in Thailand, sorted in descending order of revenue:

The market size in Thailand and the market share of Wellspire Group are estimated below:

Source: Vital Factor Consulting

Business strategies and plans for WELLSPIRE HOLDINGS BERHAD

The Group’s business strategies and plans are summarized below:

1. Acquisition/construction of a warehouse and operating facility
2. Expansion of product range - Third-party brands
3. Enhancement of e-commerce platform

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Opportunities

1. The company has achieved very good financial results. The management team is able to handle the company well and the result is reflected in the Revenue, Gross Profit margin, etc.
2. The company has established indirect distribution channels to provide wide coverage of end-consumers for the snack food product. The company mainly utilizes the indirect distribution channel where they sell the snack food products through intermediaries who will then resell its products to the respective networks of customers. Through the indirect distribution channel, the company has a customer base that includes retailers such as chain and standalone convenience stores, hypermarkets, cash and carries stores, supermarkets, petrol kiosks, and sundry shops, and a wholesaler who utilizes its existing network to sell the snack food product to sundry shops and other small retailers.

Risk

1. High-concentration client risk. The company is dependent on a concentrated group of major customers and the loss of any of these customers may affect its financial performance.
2. The group is dependent on a single product, sunflower seeds. Sunflower seeds are a snack product and a non-essential food item. As such, any reduction in the demand for snack foods particularly sunflower seeds may adversely affect the business and financial condition.

Click here to refer the IPO - Wellspire Holdings Berhad (Part 1)

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