Oriental Rise Holdings Limited (ORIS) has filed for a $12 million IPO of its ordinary shares, as per an SEC F-1 registration statement. The company supplies various tea products to consumers in mainland China. However, Oriental Rise’s revenue growth is slowing, and it faces unpredictable risks in China due to its foreign subsidiary structure. Therefore, my outlook on the IPO is Neutral [Hold].
Oriental Rise is based in Ningde City, China and aims to become a vertically integrated tea supplier in the country. Its operations include cultivation, processing, and sale of different types of teas to wholesale distributors and retail customers. The company’s Chairman and CEO, Mr. Dezhi Liu, has been with the firm since 2011 and previously held a senior position at Agricultural Bank of China.
ORIS primarily offers white and black teas, with 83.7% of its revenue coming from white tea products. It has received a fair market value investment of $7.4 million from investors, including Plentiful Thriving, Affluent Kind, and Emiline Cryielle Forcade.
The company sells most of its tea products to tea business operators, who further process or package the tea for sale to end-user businesses or individual customers. Its top five customers accounted for 42% of its revenue during the six-month period ended June 30, 2023.
The Chinese tea market is estimated to be worth $50 billion in 2022 and is projected to reach $84.5 billion by 2028. This growth is driven by increasing awareness of the health benefits of tea, availability through offline and online channels, and the absence of regulatory restrictions on tea exports.
Oriental Rise’s financial performance includes slowing top-line revenue growth, but increasing gross profit, gross margin, operating profit, and cash flow from operations. As of June 30, 2023, the company had $30.8 million in cash and $4.4 million in total liabilities, with a free cash flow of $12.9 million for the twelve months ending June 30, 2023.
In its IPO, Oriental Rise intends to raise $12 million through the sale of three million ordinary shares at a proposed price of $4.00 per share. The company’s enterprise value at IPO would be approximately $49.4 million. The net proceeds from the IPO will be used for acquisition, new plant and equipment, and general corporate purposes.
The IPO will be managed by US Tiger Securities, and the proposed IPO midpoint price per share is $4.00. The company does not plan to pay dividends and will retain future earnings for reinvestment. Oriental Rise operates in a highly competitive and fragmented market with low entry barriers, and it faces regulatory uncertainties in China. Given these risks and the performance of Chinese companies in the IPO market, my outlook on the Oriental Rise Holdings Limited IPO is Neutral [Hold].
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