Recent F&B IPO – Negative

Recent F&B companies IPO have this trend:

Kimly: -21% since IPO in March 2017.

Kimly - Share Price - 2018-02-19
Source: Google Finance

No Signboard: -27% since IPO in November 2017.

No Signboard - Share Price - 2018-02-19
Source: Google Finance

RE&S Holdings: -24% since IPO in November 2017.

RES - Share Price - 2018-02-19
Source: Google Finance

Katrina: -53% since IPO in July 2016.

Katrina - Share Price - 2018-02-19
Source: Google Finance

Their share price movement after IPO reminded me of the pawnbrokers IPO (see this old post). If this tells us anything, it’s that the public will be better off if they avoid buying shares during IPO or shortly after. Some legendary fund managers mentioned that too. We must learn from their wisdom.

Except Katrina (see this post), I haven’t really studied these newly listed companies. So, I have no idea if their current share prices are attractive or not. These companies are not doing very badly or losing money. The falling share price is more to do with the high valuation during IPO than the deteriorating fundamental after IPO.

I did buy one F&B company’s share last year, and it was Japan Foods. I first bought it in mid and late 2016 and sold out in mid 2017 (see this post). Then, I bought it again in October 2017 at average price of 0.418 during the dip and sold out two weeks ago at 0.46 after its good Q3 result. The company did the right thing to buy back its own shares during November-December 2017 when the share price was undervalued. The share buyback gave me some confidence that the company will be doing fine, and I shouldn’t wait for even lower price for entry. The buyback in this case help set the floor.

Now, I hope Mr. Market will sell it down again, and I’ll be happy to get back in. At low entry price, if the price does not appreciate, we can get 4+% of dividend yield per year. If it appreciates, we get 10-15% total return in less than 1 year. It’s not fantastic return like more than 30% but I’m happy to get what it offers given that its risk level is relatively low.

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