Koufu founders make S$0.77 per share cash offer to privatise company

KOUFU Group's VL6 : VL6 0%founding shareholders on Wednesday (Dec 29) proposed to privatise the company at S$0.77 per share in cash through a voluntary conditional offer.

The offer values the food court operator at S$425.8 million, which is 15 times Koufu’s pre-pandemic FY2019 earnings and 43 times its FY2020 earnings. 

The offeror - Dominus Capital - is an investment company incorporated on Oct 7 by Koufu's executive chairman and chief executive Pang Lim and executive director Ng Hoon Tien, the group said in a bourse filing.

The husband-wife duo has a deemed interest in 77.41 per cent of Koufu's shares - through Jun Yuan Holdings - which has given an irrevocable undertaking to accept the offer. As at Wednesday, there are about 553 million issued Koufu shares.

The S$0.77 offer price represents a premium of 15.8 per cent over Koufu's last traded price per share of S$0.665 on Dec 28, the last market day before the offer was announced.

It also represents a premium of 14.4 per cent, 13.6 per cent, 15.1 per cent and 15.3 per cent respectively over the volume-weighted average price per share for the 1-month, 3-month, 6-month and 12-month periods up to and including Dec 28.

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Delisting Koufu from the Singapore Exchange's mainboard will give the offeror and the company greater control and management flexibility in deploying available resources and facilitating any strategic initiatives or operational changes.

Shareholders will also have a clean cash exit opportunity to realise their investment, Koufu said, adding that Koufu's trading volume has been "generally low". 

Azure Capital founder and chief executive officer Terence Wong found the offer price to be at a "decent" premium and said that investors should take the deal as it's unclear what the impact of Covid-19 would be like on Koufu in the future, which has a greater presence in malls as compared to its competitors. 

"Some people will say that we're coming to the end of the pandemic and things will return to normal but that's really anybody's guess as to what's going to happen," he said. 

Justin Tang, head of Asian research at United First Partners, believes the offer is fair when compared to the counter's initial public offering price of S$0.63, as well as its competitor, Kimly, in terms of valuation. 

However, he also pointed out that some investors may have paid more than the offer price for the company's shares in the past. 

"Clearly, the offer has not been made final by Dominus Capital. That tells you that they expect some kind of resistance so it really depends on how it plays out," Tang said, noting that an additional 12.59 per cent of shares need to accept the deal before it fulfils the deal's minimum acceptance condition.  

For the first half ended June 30, 2021, Koufu posted net profit of S$9.9 million, almost quadrupling from S$2.5 million in the year-ago period. Revenue was up 18.8 per cent to S$105.7 million. 

For FY2020, the group’s net profit was 64 per cent lower at S$9.9 million. Revenue meanwhile, was down 19 per cent to S$192.4 million. 

Before the Covid-19 pandemic hit in 2020, the group posted an FY2019 net profit of S$27.7 million, while revenue stood at S$237.5 million. 

Koufu called for a trading halt on Wednesday morning prior to the announcement. Its shares closed at $0.665 on Tuesday, down 1.5 per cent or S$0.01.