My Food Bag's strong marketing will help share offer, broker says

Monday, 22 February 2021

My Food Bag is selling shares at $1.85 each, valuing the meal kit delivery company at about $450 million.

My Food Bag’s well-known brand and extensive marketing is expected to help the $450 million meal kit delivery company get enough support to list on the sharemarket next week, even though some brokers and investors don’t think it stacks up.

The company wants to raise as much as $342m through an initial public offering and list on the NZX and ASX on March 5. It’s enlisted the help of three broker firms, its mailing lists of current and past customers, and advertisements on TV and YouTube to help it market the sale.

My Food Bag was founded in 2013 by Cecilia and James Robinson and is fronted by celebrity chef Nadia Lim and backed by former Telecom chief executive Theresa Gattung. It has benefited from demand for convenience food and healthy living and has delivered more than 85 million meals to more than 300,000 households since it started and its brand is now recognised by about 88 per cent of people.

“Their marketing has been very good,” said Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene. “Hats off to them with the marketing of this IPO. With three lead brokers, they are going to have more than enough of a distribution network to be able to get this one away.”

Cecilia Robinson, Nadia Lim and Theresa Gattung of My Food Bag.

* My Food Bag valued at $450m ahead of sharemarket listing

* My Food Bag offers customers and staff first dibs for shares in the company

The company’s customers, employees, and clients of brokers including Jarden, Craigs Investment Partners and Forsyth Barr have until the end of this week to subscribe for shares at $1.85 each ahead of the listing, after the company completed its offer to institutional investors.

Still, while Sullivan thinks the company will list well, he’s not sure it will continue to grow at the pace it has in the past, given demand for online food shopping got a boost during lockdown and My Food Bag is facing increased competition from the likes of big German rival Hello Fresh.

My Food Bag expects revenue to jump to $189.5m in the year to March 31, from $153.3m last year. That’s expected to slip to $186.4m next year.

“The true test of this company will be if they can deliver or exceed their forecasts, that will be where the rubber really hits the road,” Sullivan said.

“The company is fundamentally expensive, and I do feel that with the hype and the marketing, that there may be some people who are going in to this investment on the brand and may not have done their due diligence on it. It’s not one that we are recommending to our clients,” he said.

An institutional investor who didn’t participate in the offer said he was also doubtful about the growth prospects and was sceptical that volumes and margins could be maintained. He was also unhappy about the amount of shares being sold by existing shareholders.

But he didn’t want to publicly criticise the sale because he wanted to encourage New Zealand companies to list here.

Of the $342m being raised, just $54.8m will end up in My Food Bag’s pocket, with $16.7m used to fund offer costs, $38.2m to repay bank debt, and $287.3m going to existing shareholders who are selling their shares.

My Food Bag said its institutional bookbuild on Friday was fully subscribed. It declined to say how many shares were offered.

The company’s 5 per cent gross dividend yield and large size would appeal to investors, Sullivan said.

Institutional investors including Harbour Asset Management, Milford Funds, Devon Funds Management and Clarity Funds Management pre-committed to bidding for shares in bookbuild.