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).

Investment instrument

  • 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.

Disclaimer: This posting is for information and illustrative purposes only and does not purport to show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action. This information is provided with the understanding that with respect to the material provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. You should consult your advisors with respect to these areas. By accepting this material, you acknowledge, understand and accept the foregoing.