Tealive’s Parent Sells 30% Stake To PE Firm Creador

KUALA LUMPUR (June 10): The Edge has learnt that Loob Holding Sdn Bhd — the holding company of bubble tea brand Tealive — has sold a strategic stake of 30% to private equity (PE) firm Creador. According to sources, the price was in the RM200 million to RM260 million range.

When contacted on this, Creador and Loob both in a joint statement expressed confidence the strategic partnership will take Loob to the next level, especially given Creador’s track record in aiding in regional growth of its investee companies.

However, they did not confirm or answer a question on the price of the stake, which was part of a list of queries emailed by The Edge to Loob this morning. 

In the written response, Creador founder and chief executive officer (CEO) Brahmal Vasudevan said the firm chose Loob to be its first investment in the fast-growing food and beverage (F&B) sector as Tealive had grown to be a regional leader with over 650 stores in less than five years.

Brahmal cited Loob’s impressive revenue of RM307 million and net income of RM58 million for the financial year ended June 30, 2020 (FY20). “This translated into a phenomenal three-year compound annual growth rate (CAGR) of 56% in revenue and 180% in net income.  

“Despite the pandemic, Tealive’s multi-format outlets, which include shoplots as well as outlets in malls and petrol kiosks, and its omnichannel offerings via food delivery platforms have helped it maintain a stellar performance,” he said. 

He added that this investment, through Uttama Ltd, an affiliate of Creador IV LP, will enable Creador to participate in the growth story of Tealive, which is already present in eight countries. 

“The made-to-order tea market in Malaysia has been growing over 20% in the last few years and the beverage chain per million population remains underpenetrated when compared with peers in the region and developed countries,” he added. 

Meanwhile, Loob founder and CEO Bryan Loo welcomed Creador as a strategic investor and partner, adding that the timing could not be better with Tealive’s plan to hit the 1,000th store milestone in Malaysia in the next three years.

“We just celebrated our 600th store opening last month, and we plan to open 100-150 stores each year moving forward. We are always thankful for the strong brand loyalty and support shown by Malaysians and tea lovers in every market we go into.

“We will continue to focus on our digital strategy and prioritising customer conveniences, including various cashless and contactless ordering channels — scan to order, order ahead and drive-in models across the store network,” he said.

In addition to the popular Tealive brand, Loob’s stable includes new beverage series, ready-to-eat food products under the brand of Tealive Eats and affordable coffee chain Bask Bear Coffee.

Loob is Creador’s 39th investment since inception in 2011 and Nomura acted as the financial adviser on this transaction, the statement said.

Looking at Loob’s latest earnings of RM53.5 million for FY20, and based on a potential price range of RM200 million to RM260 million would be at a historical price-earnings (P/E) of about 12.5 times to 16.2 times.

Berjaya Food Bhd (BFood) — the franchisee of Starbucks Coffee outlets in Malaysia and Brunei — is trading at a P/E multiple of 240 times, but this is because the company had one loss-making quarter in the trailing 12 months with the other three quarters profitable. 

Taking the most recent historical earnings with a full profitable financial year, BFood was trading at a historical P/E of 20.8 times in FY19 (ended June 30, 2019).

Public data shows that Loob’s recent earnings increased notiecably for FY20.

Net profit for FY20 increased 79% year-on-year (y-o-y) to RM53.5 million from RM29.88 million for FY19, according to CTOS information. It made a net profit of RM2.36 million for FY17 and RM1.96 million for FY18.

The pace of revenue growth seemed to be in tandem with its earnings for FY19 and FY20, with Loob’s top line expanding 77% y-o-y to RM319.5 million in FY20 from RM180.4 million. 

The company registered RM68.06 million in revenue for FY17 and RM86.15 million for FY18.

In February, The Edge, quoting sources, reported that Loob was looking at a strategic stake sale.

When contacted on this back in February, Loob’s Loo declined to comment.

“The only thing I can say is that we are committed to continuing to grow our business during this challenging yet fruitful period, while ensuring that the welfare of our staff is being protected at the same time,” he told The Edge then.

Loob planned for an initial public offering (IPO) exercise but that was delayed due to market conditions amid the Covid-19 pandemic.

Loo was quoted in the media last year as saying that the company will postpone the IPO exercise, citing weak market sentiment.

Source: The Edge Markets

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