Orgabio, the 3rd largest instant beverage premix manufacturer will be making its debut on Bursa Ace Market today. The Company is founded by Dato’ Ean Yong Tin Sin with more than 36 years of experience in the instant beverage premix industry. According to Smith Zander Market Researcher, manufacturing sales value of coffee, tea, milk, and cocoa beverages in Malaysia registered a compounded annual growth rate of 7.7% from RM13.8bn in 2018 to RM16.1bn in 2020. We foresee the consumption of instant beverage will continue to grow, we forecast net profit to grow by 41.6% to RM10.4m for FY23. BUY with a TP of RM0.42 premised on 10x PER, 50% discount to its direct listed peer on Bursa Malaysia and given its small market capitalisation.

Orgabio is principally involved in the i) provision of instant beverage premix manufacturing services to third party brand owners; and ii) manufacturing, sales and marketing of house brand instant beverage premixes under brand names EveryDay and BrogaHil. With its extensive experience in the formulation and manufacturing of instant beverage premixes, it managed to secure long term direct sales and supermarket customers such as TDC Avenue, Hai-O, Lotus Stores, Amway and Econsave which contributed 80.6% of total revenue in FY21.

As current capacity has been running at 73.6% as at 31 December 2021, Orgabio plans to increase capacity by utilising IPO proceeds of RM16.6m and RM2.23m for construction of new factory and acquisition of machinery. The planned new factory will have a built up area of approx. 81.6k sq ft which consists of production floor, warehouse, loading bays and office space. The new factory is expected to be completed by August 2023 which enable Orgabio to take on new customers and cater for large orders and expanding the range of product offerings.

Orgabio registered a 24.3% and 50.0% y-o-y growth in revenue for FY20 and FY21 respectively, attributed to the growing need for convenience and customer preference on the instant beverage premix. Organio also stands to benefit from Government initiative in promoting Malaysia as a destination for Halal manufacturing as it is a Halal recognised manufacturer. This allows Orgabio’s products to sell to Halal market overseas.

Orgabio had on 1st July released its 3QFY22 result with net profit of RM1.4m on the back of RM13.5m revenue. The 9 months net profit recorded RM4.1m on the back of RM48.3m revenue. Currently, the group does not have any formal dividend policy. Post IPO, its gearing ratio reduces from 0.62x as at 31 December 2021 to 0.27x.

Source: Rakuten Research - 5 Jul 2022