Fourace IPO: Attractive Margins, Positive Cash Generation, and a Strategic Business Plan

Fourace IPO (Valuation): Attractive Earnings Profile and Valuation Relative to Peers

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

Fourace Industries / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/fourace-industries" target="_blank" data-smartkarma-citation="entities:28264:1" rel="noopener">Fourace Industries (FOUR HK)</a>, an electrical appliance maker has filed for an IPO in Hong Kong to fund the expansion of its business. The company primarily operates as a personal care and lifestyle electrical appliance OEM/ODM service provider. We analysed the company, its business model and the industry it operates in, and the following are the key points we would like to highlight:</p>
<ul>
<li>Despite operating in a fragmented personal care electrical appliances market with only around 1% market share, Fourace has still been able to deliver double-digit growth rates in its top line over the past three years while generating mid-teens operating margins. The company would be one of the few players in the industry to go public (most of its competitors are still private companies) and as such offers something a little unique.</li>
<li>The Lifestyle segment, a relatively small segment, for now, could be a long-term growth driver for Fourace given the evolving trend of smart homes</li>
<li>Fourace’s move into OBM business indicates that the company is moving to monetise the strong technical expertise it has secured and its intent to serve a greater share of the market.</li>
<li>The inability to secure a diversified customer base for so long is our key concern for the company. In addition, its significant exposure to the US market makes Fourace highly vulnerable to uncertainties involving the US-China trade war</li>
</ul>

Fourace Industries (FOUR HK), an electrical appliance maker has filed for an IPO in Hong Kong to fund the expansion of its business. The company primarily operates as a personal care and lifestyle electrical appliance OEM/ODM service provider. We analysed the company, its business model and the industry it operates in, and the following are the key points we would like to highlight:

Despite operating in a fragmented personal care electrical appliances market with only around 1% market share, Fourace has still been able to deliver double-digit growth rates in its top line over the past three years while generating mid-teens operating margins. The company would be one of the few players in the industry to go public (most of its competitors are still private companies) and as such offers something a little unique.
The Lifestyle segment, a relatively small segment, for now, could be a long-term growth driver for Fourace given the evolving trend of smart homes
Fourace’s move into OBM business indicates that the company is moving to monetise the strong technical expertise it has secured and its intent to serve a greater share of the market.
The inability to secure a diversified customer base for so long is our key concern for the company. In addition, its significant exposure to the US market makes Fourace highly vulnerable to uncertainties involving the US-China trade war


Fourace IPO: Over 30 Years of Expertise Electrifies Its Business