My Food Bag biggest listing since Genesis Energy

MY Food Bag's initial public offer is set to usher in the biggest NZXlisting since Genesis Energy went public in 2014.

The meal kit company will list on the NZX and ASX on March 5, pending the sale of up to 185 million shares in an IPO that values it at just under $450 million.

The shares have been priced at $1.85 each and most of the $342 million proceeds will go to existing shareholders selling down their holdings.

Only $55 million will go to the company, of which $38.2 million will repay bank debt and $16.7 million will fund the IPO costs.

The offer, which closes tomorrow for noninstitutional investors, has led to debate about the company's growth prospects amid a more competitive landscape and Coviddriven demand for home meal deliveries.

Despite the dual listing, My Food Bag chief executive Kevin Bowler said the company had no plans to revisit launching in the Australian market, or to expand offshore internationally.

Instead, he says the company would focus on establishing local growth through developing its readytoeat offering, as part of a $37 billion opportunity within the grocery sector.

It would also look at expansion options outside of food, including pet food and cleaning and personal care subscription boxes, although these are not in immediate plans for 2021.

The secondary listing on the ASX is purely opportunistic in that it will give the company access to an additional larger capital market, he says.

‘‘We have no plans to launch in any offshore markets,’’ Mr Bowler said.

‘‘Building on our history of innovation and exceptional customer service, we have identified a pipeline of growth opportunities in New Zealand. These are based upon strategic areas of focus to expand further into the $37 billion New Zealand retail food sector.

‘‘This includes continued growth in the meal kit sector and expansion into other foodbased offerings such as readymade meals to align to consumer trends and play a bigger part in customers' lives. These are current and continuing areas of focus for the business.’’

In the past financial year, My Food Bag made a profit of $8.2 million and revenue of $153.3 million, about $40 million shy of its biggest rival, HelloFresh's almost $194 m revenue.

The product disclosure statement forecasts revenue rising to $189.5 million in 2021 and dipping slightly to $186.4 million in 2022.

The company expects net profit in 2021 of $800,000 to be adjusted on a pro forma basis to $15.6 million and to rise to $20.1 million in 2022.

Mr Bowler says the fall in profit FY21 could be attributed to costs associated with listing on two sharemarkets, and was also driven by a forecast increase in proforma earnings, impacted by a full year of procurement cost savings from contracts that were signed in the year.

Before the first Covid19 lockdown in April last year, My Food Bag says it was already experiencing an increase in demand, driven by more Kiwis shopping online. When New Zealand was placed into lockdown this trend was accelerated and the company experienced new signups and growth of 10% to 20%.

Mr Bowler said ‘‘a lot of the demand’’ experienced in April and May had been retained through the remainder of 2020 and into 2021.

While revenue for FY21 to FY22 is forecast to decrease by 1.6%, he said this could be attributed to a decrease in delivery volumes and the normalisation of orders following demand during the country's first lockdown early last year.

In the year to date, he says there has been an uplift in My Food Bag's customer numbers.

More than 300,000 people have signed up to My Food Bag since it launched in 2013.

Analysts and fund managers believe demand for the company's stock will be largely driven by its strong brand presence and position as a household name.

Some institutions, including Milford Asset Management, Harbour Asset Management and Investment Services Group (which owns Devon Funds Management) committed before the bookbuild to each buy at least a 5% stake.

The company has now completed its institutional bookbuild, which it says was fully subscribed.

My Food Bag is targeting a dividend yield payout ratio of 70% to 90% of net profit after tax in any given financial year. It intends to pay its first dividends, 7c per share, in the second half of FY22. — The New Zealand Herald