Monde Nissin IPO seen to gain traction on strong fundamentals, consumption-driven economy

By Keren Concepcion G. Valmonte

THE upcoming initial public offering (IPO) of Monde Nissin Corp. is expected to do well due to its existing businesses and the country’s consumption-driven economy despite the pandemic’s impact on market conditions.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that the company’s listing “could gain traction given the company’s fundamentals.”

In a separate Viber message, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said: “As the economy is driven on domestic consumption as its main driver, the retail sector trades at premium multiples [versus] other sectors.”

The Lucky Me! instant noodles manufacturer filed for an IPO on March 7 to raise some P63 billion, shaping it to be the country’s biggest first-time share sale.

“Industry-wise, the company is already in an advantageous position. And this is even amplified by the company’s competitiveness,” Mr. Tantiangco added. “It has already established its brands and captured significant market share in different segments of the food and beverage sector, primarily in the instant noodles and biscuits segment.”

Monde Nissin also manufactures M.Y. San SkyFlakes and Graham crackers, Fita biscuits, and Quorn Foods.

“[Investors] would be [attracted] to its [yearly] dividend offering and its stability as a food manufacturer. Specifically, basic food items that have constant demand despite economic conditions,” AAA Southeast Equities, Inc. Research Head Christopher John J. Mangun said via text message.

Shares for Monde Nissin’s upcoming IPO are said to be priced at P17.50 apiece at most.

“Relative valuation wise, the share is quite expensive. But the good fundamentals and prospects are seen to justify the premium,” Philstocks Financial’s Mr. Tantiangco said.

Mr. Mangun noted that it is possible the public may see a lower final offer price, however, it depends on the demand of investors.

“Investors should be looking at what the company plans to do with its IPO proceeds,” Mr. Mangun said. “[Some] 63.3% [or] almost P40 billion of the estimated gross proceeds… will be for existing obligations rather than future growth.”

According to the company’s preliminary prospectus filed with the Securities and Exchange Commission, net proceeds are estimated to reach P60.4 billion. Some P22.22 billion or 36.8% of the proceeds will be used to fund its capital expenditure, which will be disbursed from 2021 to 2023.

Monde Nissin plans to use P17.31 billion or 28.7% to pay for the redemption of its Arran Convertible Note, while at least P20.67 billion or 34.6% will be used to finance the repayment of its loans.

The remaining balance of the proceeds will be used by the company for general corporate purposes.

“If the expected gross proceeds are not realized, the company will use its internally generated funds from operations and existing cash flows, existing credit lines, and/or other potential borrowings to finance the expected uses,” Monde Nissin said.

AAA Southeast Equities’s Mr. Mangun said the biggest concern might be the company’s lack of potential future growth.

“The only growth area that is worth looking at is its pivot to [a] healthier diet with Qourn. Even then, it looks like the company has already maximized its distribution and sales of Qourn products globally,” Mr. Mangun said.

The food manufacturer plans to expand its Quorn Foods brand, which offers alternative products to meat, further in the United States. Monde Nissin previously said it would invest more in its production capacity in the US.

Meanwhile, Philstocks Financial’s Mr. Tantiangco reminded investors that Monde Nissin remains subject to the country’s overall economic condition.

“Investors should still be mindful of the current economic situation as well as the outlook,” Mr. Tantiangco said. “A delay in our economic recovery could weigh on Monde Nissin’s sales since it would keep disposable incomes subdued which in turn is going to weaken consumer spending.”

“If timing is aligned, then the company can command a superior valuation on the back of the Philippines’ recovery post-pandemic,” Regina Capital’s Mr. Limlingan said.