Maison Solutions Readies $12 Million U.S. IPO (MSS)

A Quick Take On Maison Solutions Inc.

Maison Solutions Inc. (MSS) has filed to boost $12 million in an IPO of its Class A standard stock, in accordance with an S-1 registration assertion.

The agency operates a community of Asian meals and merchandise shops within the Los Angeles area.

Given the corporate’s uneven income historical past, tiny dimension, skinny capitalization and excessive valuation expectations at IPO, I’ll move on the IPO.

Maison Overview

Monterey Park, California-based Maison Solutions Inc. was based to accumulate and function full-service Asian-food supermarkets in predominantly Asian-American neighborhood areas.

Management is headed by President and CEO John Xu, who has been with the agency since 2019 and was beforehand President of J&C International Group and, earlier than that, President of Ideal City Realty.

The firm’s major choices embody the next:

• Produce

• Meats

• Seafood

• Groceries

• Other merchandise

As of January 31, 2023, Maison has booked a good market worth funding of $188,104 from traders together with Golden Tree USA, Stratton Arms Holding, and Amsterdam NYC Fund, LP.

Maison – Customer Acquisition

The firm locates its shops in high-visibility areas and markets to native residents by means of a wide range of means.

The agency operates 4 market places in Los Angeles, California, by means of the acquisition of equity pursuits.

Selling bills as a share of whole income have risen as revenues have elevated, because the figures beneath point out:

Click to enlarge

(Source – SEC)

The Selling effectivity a number of, outlined as what number of {dollars} of extra new income are generated by every greenback of Selling expense, rose to 1.5x in the newest reporting interval, as proven within the desk beneath:

Click to enlarge

(Source – SEC)

Maison’s Market & Competition

According to a 2022 market research report by Grand View Research, the worldwide ethnic meals market was an estimated $39.5 billion in 2021 and is forecast to achieve $70.8 billion by 2028.

This represents a forecast CAGR (Compound Annual Growth Rate) of 8.7% from 2022 to 2028.

The essential drivers for this anticipated progress are a rising reputation of ethnic meals amongst developed nation populations.

Also, the chart beneath exhibits the historic and projected future progress charge of the U.S. ethnic meals market:

Major aggressive or different trade contributors embody the next:

• 99 Ranch Market

• HMart

• Weee!

• Independent market operators

Maison Solutions Inc. Financial Performance

The firm’s current monetary outcomes may be summarized as follows:

• Growing topline income

• Variable gross revenue and gross margin

• Uneven working revenue

• Fluctuating money circulate from operations

Below are related monetary outcomes derived from the agency’s registration assertion:

Click to enlarge

(Source – SEC)

As of January 31, 2023, Maison had $2.6 million in money and $30.0 million in whole liabilities.

Free money circulate through the twelve months ending January 31, 2023, was $1.2 million.

Maison Solutions Inc. IPO Details

Maison intends to boost $12 million in gross proceeds from an IPO of its Class A standard stock, providing three million shares at a proposed value of $4.00 every.

Class A standard stockholders will obtain one vote per share, and the only real class B shareholder, president and CEO John Xu, will likely be entitled to 10 votes per share.

The S&P 500 Index now not admits corporations with a number of lessons of stock into its index.

No current shareholders have indicated an curiosity in buying shares on the IPO value.

Assuming a profitable IPO, the corporate’s enterprise worth at IPO would approximate $65.9 million, excluding the consequences of underwriter over-allotment choices.

The float to excellent shares ratio (excluding underwriter over-allotments) will likely be roughly 15.79%. A determine beneath 10% is usually thought of a ‘low float’ stock which may be topic to important value volatility.

The agency is an ‘rising progress firm’ as outlined by the 2012 JOBS Act and has elected to benefit from diminished public firm reporting necessities; potential shareholders will obtain much less info for the IPO and, sooner or later, as a publicly-held firm inside the necessities of the Act.

Immediately after the IPO, MSS will likely be a ‘managed firm’ by John Xu beneath the Nasdaq Stock Market Rules.

Management says it should use the online proceeds from the IPO as follows:

We presently intend to make use of the online proceeds to us from this providing primarily for [i] finishing the acquisition of the remaining 90% equity pursuits in [a] the Alhambra Store from Ms. Grace Xu, partner of Mr. John Xu, our chief government officer, and [b] Dai Cheong from Mr. Xu, by paying off the SBA loans held by every entity of roughly $2.0 million and $2.4 million, respectively, as partial consideration for such acquisitions; [ii] opening new heart shops, together with a flagship retailer in Rowland Heights, California; [iii] repaying our two loans of roughly $0.39 million in mixture with American First National Bank, which loans have an rate of interest of 4.5% every year and a maturity date of March 2, 2024; [iv] analysis and growth of our working techniques with JD.com, together with upgrading our ERP system and POS system; [v] growing our enterprise on-line; and [vi] making upgrades and performing renovations to our current shops.

We intend to make use of any remaining steadiness of the online proceeds for normal company functions, together with working capital, gross sales and advertising actions, normal administrative issues, working bills and capital expenditures.

(Source – SEC)

Management’s presentation of the corporate roadshow is just not obtainable.

Regarding excellent authorized proceedings, administration says any present authorized proceedings wouldn’t have a cloth antagonistic impact on its monetary situation or operations.

The sole listed bookrunner of the IPO is Joseph Stone Capital LLC.

Valuation Metrics For Maison

Below is a desk of related capitalization and valuation figures for the corporate:

Click to enlarge

(Source – SEC)

Commentary About Maison’s IPO

MSS is searching for U.S. public capital market funding to accumulate remaining equity pursuits within the 4 shops and for growth and dealing capital functions.

The firm’s financials have produced rising topline income, uneven gross revenue and gross margin, variable working revenue and constructive money circulate from operations.

Free money circulate for the twelve months ending January 31, 2023, was $1.2 million.

Selling bills as a share of whole income rose to 16.2% in the newest reporting interval; its Selling effectivity a number of elevated to 1.5x, a constructive sign indicating elevated income era effectivity.

The agency presently plans to pay no dividends and to retain any future earnings for reinvestment again into the agency’s progress and dealing capital necessities.

MSS’s current capital spending historical past signifies it has spent calmly on capital expenditures as a share of its working money circulate, though I count on this may change post-IPO because the agency seeks to face up extra places and spend money on firm techniques upgrades.

The market alternative for offering ethnic meals choices within the U.S. is anticipated to develop at a reasonable charge of progress by means of 2030.

Joseph Stone Capital LLC is the only real underwriter, and there’s no knowledge on the agency’s IPO involvement during the last 12-month interval.

Risks to the corporate’s outlook as a public firm embody its untested center-satellite enterprise mannequin, and its violation of a financial institution mortgage debt service protection ratio.

Also, the corporate is searching for to associate with China-based JD.com to improve its inner techniques and enhance its product stock. This partnership is probably not profitable and is topic to both get together’s termination.

As for valuation expectations, administration is asking traders to pay an Enterprise Value/Revenue a number of of roughly 1.3x.

However, a January 2023 valuation index by famous valuation professional Dr. Aswath Damodaran of publicly held Retail (Grocery and Food) shares indicated a mean EV/Sales valuation of 0.37x, so the MSS IPO seems to be excessively priced.

Given the corporate’s uneven income historical past, tiny dimension, skinny capitalization and excessive valuation expectations at IPO, I’ll move on the IPO.

Expected IPO Pricing Date: To be introduced.