Wellspire Holdings Bhd (Wellspire), an exclusive distributor of ChaCha brand snack foods in Thailand, will be making its debut on Bursa Ace Market today. Possessing a 10-year relationship with ChaCha from China which have a manufacturing plant in Thailand, Wellspire has been riding on ChaCha’s business growth. Due to increasing demand for ChaCha’s sunflower seed snackfood, its rented 3,600 sq. m. warehouse has been largely occupied. We forecasted a net profit growth of 125% in FY23. BUY with a TP of RM0.26 based on 15x PER over FY23 EPS, slight discount to FTSE Bursa Malaysia Ace Index PE.

Wellspire covers all distribution channels in Thailand such as 7-11, Big C, Tops market, Makro, Tesco, Lotus’, Family Market and the mid to small size retailers. It has established a strong market presence with Cha Cha’s products (94.5% revenue contribution as at June 2022) for the past 10 years. Banking on the wide distribution channel, Wellspire has been expanding its products range and successfully on board other brand such as Cundo in 2020 and introduced its own brands namely Pee Ree, King Kong and Miyu. This has been testified by the increasing revenue contribution of its own brand from 3.6% in FY2020 to 6.0% in FY2021. In May 2022, Wellspire was appointed as an agent, the brand owner and manufacturer of konjac and gluten snacks from China to distribute in Thailand which is targeted to launch by 1QFY23.

As the current 4,897 sq. m distribution centre and 600 sq. m. chiller room located in the province of Pathum Thani in Thailand is rented, Wellspire intend to acquire/construct a warehouse and operational facility as a long term investment to increase its asset base. RM16m from the IPO proceeds will be utilitised for this purpose and target to be completed within 18 months. The new distribution centre will be strategically located to serve 43 customers’ sales and distribution points in Thailand.

Wellspire had achieved net profit of RM3.2m for the 9MFY2022 on the back of RM90.8m revenue. FY22 bottomline is expected to be lower due to one-off listing fees.

Wellspire has the intention to distribute 30% of PAT as dividends. Thus, we forecasted Wellspire to pay dividend of 0.4sen FY23 and FY24 translating into yields of 1.5% and 1.6% respectively.

Source: Rakuten Research - 16 Jan 2023