Bulgaria's largest producer and distributor of organic products Smart Organic will seek to raise 3 million euro through an initial public offering (IPO) on the Bulgarian Stock Exchange (BSE). The company will kick off the IPO today, on Thursday, November 11, on the BSE's SME growth market BEAM. The funds will be used for the acquisition of an unnamed German competitor and the construction of a new production facility. Both projects will be financed with a bank loan too, Smart Organic founder and owner Yani Dragov told the Capital daily. Lead manager of the issue is Karoll.
The company will offer 310,000 shares at a price of 15.25 to 18.90 levs (7.8 - 9.7 euro) per share. Thus the maximum capital expected to be raised will be between 4.7 million levs and 5.86 million levs, giving Smart Organic a market cap of 157 to 200 million levs. Such an evaluation would place it on par with companies like Telelink BS, which however has much higher consolidated revenue and profit. Smart Organic booked a turnover of 36.9 million levs in 2020 and projects a jump to 57.6 million levs in 2021. The net profit is expected to nearly double, from 5 million levs last year to 9.7 million in 2021.
The financial results and the pricing of the new shares give Smart Organic a P/E ratio of more than 30, which is nearly twice the ratio of the blue-chip SOFIX index (P/E of about 16). Based on the projected profit for 2021, however, the P/E ratio drops to between 16 and 20 depending on the share price to be achieved.
The very IPO procedure will start at 9.30 a.m. with a 40-minute window for individual investors, who can file bids for up to 2,000 shares per person. Only then larger investors will be admitted to bidding. If the issue is successful, Smart Organic will become the first bio food producer listed on the BEAM market.
The deal with the German competitor is at an advanced stage and should be closed in November. The company did not disclose any further details due to a confidentiality agreement.
The other planned investment is the construction of a production facility that will spread on 4,000 sq.m. "We are currently choosing a suitable site and plan to start construction in the spring of 2022. About 6 million levs (3 million euro) is planned for the first stage of the project. The investment will allow Smart Organic to double its output volume," Dragov told the Capital.
Currently the company has its own production facility in Sofia that spreads on 6,000 sq.m and it also rents warehouses. Besides a new factory, Smart Organic plans to construct a new building too, adjacent to the current facility. "We already have a construction permit. The investment amounts to some 5 million levs and construction should finish next summer. Most of the building, which will spread on 5,000 sq.m, is designed for a warehouse," Dragov said.
Smart Organic produces organic energy and protein bars under the Roobar brand, different cookies, superfoods, salty snacks, granola. About 70% of the output is exported to more than 60 countries, the largest markets being Germany, Switzerland, Scandinavia, Benelux, Spain, France, Romania and the Middle East. The company's products are also offered in 1,500 outlets of German drugstore chain dm.
Smart Organic sells its products in more than 650 outlets in Bulgaria, as well as online. It also has its own chain of stores for organic foods, Zelen.
Late last year Smart Organic built a photovoltaic plant that now provides half of the electricity needed for production. Earlier this year it opened a snack bar in Sofia, Zelen, that offers vegan and vegetarian food. In August 2021 it became official distributor of the global leader in plant-based meat production Beyond Meat for Bulgaria and North Macedonia.
Smart Organic's revenue topped 36 million levs in 2019. "In 2020 the company increased its sales 11% and in 2021 we expect 26% organic growth. Together with the German company we are preparing to acquire, the consolidated sales in 2021 are projected to reach some 30 million euro," Dragov said. Smart Organic employs about 240 people.