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CEO Djoesianto Law wants to export to China, home to 20 million Muslims. Photo by Leong Chan Teik
CONSCIENCEFOOD, maker of popular Indonesian instant noodle brand Alhami, yesterday launched its IPO at 22 cents per share.

Applications close on 3 Aug at 12 noon and the shares start trading next Thu on 5 Aug.

The company wants to raise S$18.8 million and will float S$87.2 million of shares.

Based on the IPO price, the stock sells for only 7 times historical PE, cheaper than locally-listed convenience food players like Super (10 times) or Food Empire (15 times).

Though smaller, it has aggressive expansion plans and is also more lucrative.

Its Indonesian Chinese owner, Mr Djoesianto Law, met NextInsight recently in an interview to discuss its niche in the home base of the world’s largest instant noodle maker, Indofood Sukses Makmur.

Consciencefood is a leading instant noodle maker in the northern part of Sumatra inhabited by about 55 million people.

   
Convenience
food player
Stock
price
Market
cap
FY09
sales
Operating
margin
PE
CONSCIENCEFOOD 22 cts $87m $69m 23.5% 7.4X
FOOD EMPIRE 34.5 cts $183m $196m 4.4% 15.1X
SUPER GROUP 88.5 cts $483m $296m 13.3% 9.8X
 
 


Its factory in the Sumatran capital of Medan has 6 production lines, and is able to produce 741 million packs of instant noodles and 360 million packs of snack noodles a year.

As instant noodle is a fast-moving consumer good, it is cost effective to distribute only within 300 km from its production plant.

Consciencfood supplies to Java through contract manufacturers based in the island's capital, Jakarta, but wants to use S$8 million of IPO proceeds to build a new plant there.

This will dramatically increase its market as Java is the world’s most populous island, inhabited by 130 million people.


Consciencefood’s branding strategy leverages on religion: not only are all its convenience foods halal-certified, product names also leverage on consumers’ religious affinity.

With 240 million inhabitants, Indonesia is the 4th most populous nation and is home to the world’s largest number of Muslims.

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Alhami High Fibre is pitched at the relatively untapped market for health-conscious consumers.

Consciencefood’s top brand Alhami means ‘thanksgiving’, while its mass-market brand Santremie is a common term referring to ‘student of an Islamic school’.

It also has a vegetarian range catering to Buddhists, going by the product name Maitri, or ‘conscience’.

Its strategy seems to have worked: revenues grew 22.4% a year over FY2007-FY2009 to S$68.6 million with net margins at an enviable 17.3%.


Another reason for the top line growth was an oligopolistic decision among Indon instant noodle makers to raise prices.

As a result, Consciencefood’s average selling prices increased some 55.5% in 2008 when retail prices were adjusted 3 times.

Mr Law himself is a self-professed practicing Buddhist.  His business philosophy is to give back to society, which is why he named the listing entity “Consciencefood”.

”Running a profitable business allows one to practice philanthropy. It also creates employment,” he said.

Instant noodles have traditionally been viewed as junk food that grows in demand during recessions, and the company now wants to supply organic food.

Not to mention organic products cater to a more lucrative market.  In its product pipeline are certified organic isotonic health drinks and certified organic canned coconut milk.


It already launched in 2008 an Alhami variant that is high in fibre, and contains neither monosodium glutamate (MSG) nor artificial coloring for health conscious customers.

”We are the first high fibre instant noodle maker,” said Mr Law, who believes his closest competition comes from the high-grade variety from Japanese manufacturers.

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Consciencefood has a niche in western Indonesia but wants to expand to Java in the central by building a manufacturing plant there.

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