Mediland to Raise A$12.5Mn – A$15 Mn through IPO

Mediland Pharm Limited (ASX: MPH) is a leading retail company and operates in the Chinese inbound tourism sector in Australia. It partners with major certified Chinese Government travel agents and wholesale tour operators. The company is focused on providing the best of Australian health and well-being products to its customers. Moreover, it offers a spectrum of high-quality health, well-being and skin care supplements, based on quality ingredients mainly sourced from the clean, green land and water for, which Australia is renowned.

On 23 November 2019, the company lodged a Prospectus with Australian Securities and Investments Commission to raise $12.5 million through the issue of 62.5 million Shares at a price of $0.20 per Share, with the ability to accept oversubscriptions to raise a further $2.5 million. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

The company has enhanced its existing retail network as a part of its business growth strategies going forward. It has recently completed renovation of Melbourne store expected to drive sales growth in the short term, relocating its Gold Coast store to larger premises is planned for FY2020, when the lease of the existing location expires and will enhance profitability through increasing own-brand sales as a portion of total sales. Moreover, it will expand its retail network through the acquisition and development of stores servicing Chinese consumers outside of tour groups, grow online distribution and focus on the development of Company-owned brands.

On the financial front, the proforma revenue in FY18 stood at ~$34.08 million compared to ~$26.97 million in FY17 and ~$31.47 million in FY16. The revenues declined in FY2017 when compared to FY2016, which was partly a result of fewer tour groups as well as less average revenue per tourist. The decline was in relation to the sale of merchandise and products, with commissions received remaining consistent. During FY2017, Management re-structured the promoter arrangements which resulted in the Company paying less promotion fees compared to FY2016. This, however, had the impact of ITO’s bringing in fewer tour groups on the company’s stores. In order to stimulate sales during this time, the store managers reduced the prices of goods, which resulted in customers purchasing on average more products but generating overall lower sales revenues at the company’s retail stores. The proforma NPAT for the company, however, stood at ~$3.65 million in FY18 as compared to ~$4.96 million and ~$1.59 million in FY 17 and FY16 respectively.

On the funding of its operations, the company’s principal sources of funds are expected to be cash flow generated from operations and cash on hand. Upon Completion of the Offer, Mediland Pharm will have a pro forma cash balance of $11 million in the case of the Minimum Subscription.

The company intends to pay a dividend to shareholders based on the targeted dividend payout ratio in the range of 20% to 40% of statutory NPAT. Assuming the Minimum Subscription, this payout ratio would have resulted in a dividend per share on the pro forma FY2018 NPAT equal to 0.23 cents to 0.47 cents per share, fully franked, representing a dividend yield of 1.1% to 2.3% of the Offer Price.


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