Specialty Coffee Company
- More than 30 types of specialty beans
- 10 branches across 22,000 square feet (average of 2,200 square feet per outlet), mainly in Klang Valley
- RM9 mil total investment cost (average cost per outlet of RM0.9 mil)
- Multi-storey headquarters and central kitchen (10,000 square feet)
- 120 staff, approximately 100 of which are baristas
- FYE 31 December 2015: RM12 mil in store-level revenue and RM2 mil in store-level profitability (net after operating expenses e.g. cost of goods sold, barista staff expenses, rental expenses).
- Seeking to raise up to RM2.5 mil for store expansion (addition of 2 outlets and 1 kiosk).
- Convertible debt of up to RM2.5 mil.
- Amounts of less than RM2.5 mil is acceptable (amounts in a multiple of RM100,000).
- 15% coupon payment.
- Full principal and coupon repayment after one (1) year.
- Debt-holder will have the option to convert the debt into equity on the basis of a pre-money valuation of 10x the RM2 mil store-level profitability.
- Therefore, the floor return is 15%.
Scenario #1: RM100,000 investment, no conversion
- On redemption (after 1 year), you receive RM100,000 principal and RM15,000 coupon, for a total of RM115,000.
Scenario #2: RM100,000 investment, you elect to convert the debt into equity
- After 1 year, you are entitled to RM115,000 as per above.
- Assuming store-level profitability is now RM2.2 mil, the pre-money valuation is RM22.0 mil.
- You elect to convert the RM115,000 into equity.
- You will now own (115,000)/(22,115,000) of the Company.
- Note: You may also convert part of the RM115,000 into equity & receive the balance in cash.
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