Report summary
Company Overview
Benz International is a food and beverage company with over 27 years of operation in Hong Kong. It has two major divisions: (1) In terms of distribution business, the company distributes and markets a diverse portfolio of food and beverage products from overseas brands by providing supply chain solutions to overseas brand owners and local retailers. The main products include “flavored sugar” candy directly purchased from Japanese brand owners and re-distributed to Hong Kong retailers; (2) In terms of retail business, the company is licensed to establish and operate its own retail stores for several overseas food and beverage brands in Hong Kong, currently the main retail brands” “Tianren Tea” has established and operated 32 retail stores. According to Frost & Sullivan data, as of October 31, 2017, it accounted for about 24.3% of the market share of the Hong Kong tea chain market, ranking first in the Hong Kong tea chain market in terms of total revenue.
In FY3/2015-FY3/2017, Binance International's revenue grew rapidly, with revenue of HK$283 million, $300 million and HK$368 million respectively. Net profit for the same period was HK$16.25 million, 21.15 million and HK$28.26 million respectively. The compound annual growth rate of net profit reached 31.9%, mainly due to the rapid increase in the number of “Tianren Tea” retail stores. Profit margins also increased, with gross margin increasing from 23.3% in 2015 to 24.8% in 2017, and net interest rate increasing from 5.8% in 2015 to 7.8% in 2017.
Status and prospects of the industry
The distribution business plays an important role in the local food and beverage industry in Hong Kong because there is a shortage of local agricultural production and farms, and about 95% of food and beverage products are imported from overseas. From 2012 to 2016, the sales value of food and beverage distribution increased from HK$40.8 billion to HK$45.5 billion, an increase of 2.8% at a CAGR of 2.8%. However, the local food and beverage distribution industry is highly fragmented, with more than 19,000 market participants in 2015, and competition in the market is fierce.
The popularity of tea has increased in Hong Kong in recent years. The size of the Hong Kong tea chain market grew steadily from HK$489.8 million in 2012 to HK$552.8 million in 2016, with a compound annual growth rate of 3.1%.
Advantages and opportunities
Provide supply chain solutions to attract overseas brands and local retailers.
It has a well-developed customer network and a rapidly growing retail network in Hong Kong.
We have a strict quality control and certification system.
Weaknesses and risks
Consumer preferences, consumption levels, and general economic conditions may influence a company's business.
A number of the company's retailers with significant bargaining power account for a significant share of the company's distribution and sales.
The company faces risks associated with rising rents and labor costs.
valuations
The prospectus did not give a profit forecast. The price-earnings ratio corresponding to the 2016 A price-earnings ratio was 11.3-14.2 times, which was lower than the peer average, while the net market ratio was 2.6-2.8 times higher than the peer-to-peer average. The company's market capitalization is small (HK$32-4 million). Based on the company's position in the industry, performance and valuation level, we gave the IPO special rating “5”.