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Thursday, April 18, 2013

Analysis on Asian Food Channel Sale

I do not know Hian Goh or Maria. Usually i know the players in the internet space since many are my friends or i have met with them over the years of networking. But i am a very competitive person and so when someone gets a big newspaper announcement about their exit, i am driven to find out the details of the deal. I hope to write a lot more on this topic to help readers learn how to analyze such deals and to get a more transparent market. Information is usually obtained via internet search or ACRA reports. If they are estimates, i will say so.

1) AFC made about 8M USD in revenues and lost 2M USD in FY2011. So unless 2012 improved dramatically for them, chances are AFC is a loss making entity that Scripps bought with revenues of maybe 8M USD. I discounted the contra deals they booked as revenue in 2011.

2) Scripps is a medium size american MNC with about 10B market cap. So it is a genuine good buyer. This is important since there are some bs deals that somehow get mentioned. Eg. some startup buy another startup for no cash. Scripps trades at about 4 times sales and 15 times PE. These 2 metrics are important since they determine the rough range which Scripps will pay for.

3) Mr Hian Goh owns about 550K shares of the company. Maria slightly less. Company has issued about 8.8M shares in total over the years raising some S$20M. Amazing how they managed to convince investors to invest throughout years of losses. I would not invest but i guess i am not as rich as their investors. All big names.

4) Mr Finian Tan said he got back 100% returns on vickers investment on ST article. Vickers invested a few rounds so hard to say. But first round was about US$2.5 to $3 per share. Subsequent rounds were 3.5 each. So we can safely say company was sold for about $6 to $7 USD per share? With 8.8M shares that is a sale price of about 50 to 60M usd. Or about 5 to 6 times sales. Compare to scripps market valuation of 4 times, it feels about right. No PE valuation to speak of since i do not know their profit if any.

5) Founders Hian and Maria get to exit with about 3-4M USD and maybe a good job with scripps and some potential earnouts. I think they got some share options too which should add another 1+M for them. So total exit should be from 5-6M USD. Of course if my initial estimate of 50-60M USD is wrong then it will be lower. Possible to be lower as parent company only gets 4 times on market. Anyway, good for them!

1 comment:

  1. Update since scripps is listed and has to disclose acquisition details. They paid a premium for afc at $66m usd. So that is about 80m sgd