2 September 2024,
WOODPECKERS Group Sdn Bhd, the food and beverage (F&B) group that holds the master franchise rights for Spanish frozen yoghurt chain Llao Llao in Malaysia, is eyeing an initial public offering (IPO) on the Main Market of Bursa Malaysia amid an expansion plan to bring the group to the next level.
The capital raised from its IPO will be used to expand its brands, which would constitute 25% of its market valuation. Its CEO Tan Kai Young describes it as “sizeable”, confirming rumours about the intended exercise.
There are currently 121 Llao Llao outlets in Malaysia, with another 14 slated to open by year end. (Photo by Llao Llao Malaysia)
This article first appeared in The Edge Malaysia Weekly on August 26, 2024 – September 1, 2024
WOODPECKERS Group Sdn Bhd, the food and beverage (F&B) group that holds the master franchise rights for Spanish frozen yoghurt chain Llao Llao in Malaysia, is eyeing an initial public offering (IPO) on the Main Market of Bursa Malaysia amid an expansion plan to bring the group to the next level.
The capital raised from its IPO will be used to expand its brands, which would constitute 25% of its market valuation. Its CEO Tan Kai Young describes it as “sizeable”, confirming rumours about the intended exercise.
Declining to elaborate on details and the timeline for the IPO, he says the process for the flotation exercise has begun and that he hopes to submit its application to the Securities Commission Malaysia and receive its nod “not too long from now”.
“Llao Llao Malaysia is a leader with a 90% market share in the frozen yoghurt business. Woodpeckers Group has a debt ratio of 0.11 times, which shows that our growth is internally funded. We are where we are today thanks to the support of the Malaysian market. Going for an IPO makes sense to me as it gives the public a chance to be part of the group’s success,” Tan, 36, tells The Edge in an interview. He discovered Llao Llao when he was working in a bank in Singapore a little more than a decade ago.
“The second Llao Llao [in Singapore] opened opposite my place. I was keen on its prospects and wanted to do something about it back home. So I returned to Malaysia, obtained the master franchise rights and opened a few outlets, the first of which was in Pavilion Kuala Lumpur in 2015,” says Tan, who has 88.06% shareholding in Woodpeckers Group.
Chua Ray-Men — son of tycoon Tan Sri Chua Ma Yu, chairman of CMY Capital Group, which developed St Regis Kuala Lumpur in a joint venture with Malaysian Resources Corp Bhd — has a 6% stake in Woodpeckers Group. “Ray-Men is involved in the big decisions of the group,” says Tan.
Besides Llao Llao, which is a major revenue contributor (80% to 85%) to the group, Woodpeckers Group also holds the master franchise rights outside of Thailand for ChaTraMue, a tea brand by Cha Thai International. It has its own brand Shae.co, selling coconut shakes, and TBC, a casual fine dining restaurant in Taman Tun Dr Ismail, Kuala Lumpur.
“By 2025, we want to focus on growing the other brands, bringing Llao Llao’s revenue contribution to about 70% to 75% and the remaining brands to 25% to 30%,” says Tan.
Leveraging key franchisees for rapid expansion
There are currently 121 Llao Llao outlets in Malaysia, with another 14 slated to open by year end.
“For now, we are focusing on growing the ChaTraMue brand, which is the biggest and oldest tea brand in Thailand. We launched it [at IOI City Mall in Putrajaya] last October and it has been very well received by the locals,” says Tan, who intends to grow the ChaTraMue outlets from 21 to 40 this year.
“There is a higher concentration of outlets in the Klang Valley but by year end, the brand will be available in Penang, Johor, Terengganu and East Malaysia. We are focusing much of our resources on ChaTraMue. Hopefully, we will have 100 outlets by next year,” he says.
Woodpeckers has opened five Shae.co outlets, four of which are in the Klang Valley and one in Penang. It plans to launch the brand in the Philippines by early November with a strategic partner there.
Tan explains that the mushrooming of Llao Llao outlets over the past five to six years has been done with a number of its key franchisees, 75% of whom hold more than one Llao Llao outlet.
“We have a good relationship with our Llao Llao franchisees and some of the key players have expressed an interest in taking up the ChaTraMue brand and expanding it in Perlis and Terengganu,” he says.
“One of the pain points in doing a franchise business is the onboarding process. We want to deal with fewer franchisees. Now that we have completed the filtering process for Llao Llao’s franchising, we will leverage these key players for the expansion of the other F&B brands in our group.”
For context, the cost to set up a Llao Llao outlet is about RM600,000 to RM650,000, including rent, raw materials and inventory. It takes about 1½ years on average to break even. The set-up cost for a ChaTraMue outlet is about half of that or slightly lower.
“ChaTraMue is unique to the regular bubble tea offerings in the market today since it is a Thai tea. Its newness to the market is to our advantage but there is a limited time to localise it,” says Tan, adding that the average selling price per cup is RM9.90, putting the brand in competition with the affordable bubble tea beverages in the market.
He says Woodpeckers will soon add two brands to the group, one of which is a scalable chain of restaurants, while the other is a standalone restaurant. Based on a search of the latest company data, the F&B group recorded a net loss of RM728,444 for the financial year ended Dec 31, 2019 (FY2019), which narrowed to a net loss of RM601,171 in FY2020 before posting a net profit of RM9 million and RM27.3 million in FY2021 and FY2022 respectively. Revenue more than doubled from RM54 million to RM123.5 million in those four years.
“Revenue last year was 20% higher at more than RM140 million. We aim to end FY2024 with a revenue of RM210 million, and to grow it by 10% annually thereafter,” says Tan.
The group had a net profit margin of 18.48% and 22.14% in FY2021 and FY2022 respectively.
Source : THE EDGE MALAYSIA
Full Article : https://theedgemalaysia.com/node/724234
