The Offer

Company Overview

WEBUY GLOBAL LIMITED (WBUY) is an emerging Southeast Asian e-commerce retailer with a focus on groceries and travel. They operate within the broader e-commerce industry, which involves online transactions, supply chain management, electronic fund transfers, marketing, and more. Additionally, WBUY specializes in community e-commerce, connecting like-minded social media users within platforms like Facebook, Instagram, and TikTok to create online community groups.

Key Highlights

Primary Offering: 3,500,000 common shares (or 4,025,000 common shares if the underwriters fully exercise their over-allotment option). WBUY has provided the underwriters with a 45-day opportunity to purchase an additional 15% of the common shares being offered in this initial public offering.

Use of proceeds:

• The utilization plan entails the following allocations:
  • The establishment of the WEBUY CLUB network for fruit distribution and community development in Indonesia, which will receive USD 1,127,000 (10% of the total proceeds).
  • Investment in comprehensive marketing initiatives within Indonesia, with USD 1,690,500 (15% of the total proceeds) dedicated to this purpose.
  • Enhancements to information technology infrastructure, funded by USD 2,254,000 (20% of the total proceeds).
  • Expansion and the development of business operations in Malaysia, for which USD 1,127,000 (10% of the total proceeds) has been allocated.
  • Expansion and the development of business operations in Thailand, with a corresponding USD 1,127,000 (10% of the total proceeds).
  • Expansion and the development of business operations in Vietnam, receiving USD 1,127,000 (10% of the total proceeds).
  • Augmentation of global supply chain capabilities, supported by USD 1,127,000 (10% of the total proceeds).
  • Provision for working capital and general corporate purposes, with USD 1,690,500 (15% of the total proceeds) set aside for these needs.
• In total, the allocation plan amounts to USD 11,270,000, utilizing 100% of the total proceeds.

Dividend policy:

WBUY has not historically distributed cash dividends to common shareholders, as the company has chosen to retain earnings to support its ongoing operations and business expansion. It is unlikely that cash dividends will be issued in the foreseeable future. The decision to distribute dividends is at the discretion of the board of directors and must adhere to relevant regulations, including those of the Cayman Islands, where dividends can be sourced from profits or the share premium account, but not in a way that jeopardizes the company's ability to meet its financial obligations. If dividends are declared, their form, frequency, and amount will be determined based on various factors, including business performance, capital needs, financial conditions, contractual obligations, and other relevant considerations, with payments made in U.S. dollars.

Financial Highlights (Expressed in USD):

• Improved Top-line financials: In the fiscal year ending on December 31, 2022, total revenue surged by nearly USD 22.26 million, a substantial 99.9% increase, reaching approximately USD 44.56 million compared to the previous year's USD 22.30 million. This growth was primarily driven by expanded grocery sales in Singapore and the remarkable growth of grocery sales in Indonesia, attributed to a successful market entry in 2020. Additionally, the introduction of a community-centric business model in Indonesia positions the company for significant future growth. However, it's noteworthy that revenue in Malaysia declined due to a deliberate strategy to scale down operations, culminating in the sale of the Malaysian subsidiary to an unrelated entity in July 2022. Moreover, a new venture selling packaged tours in Singapore generated USD 6,434,285 in revenue, constituting 14.4% of the total revenue in January 2022.
• Improved Gross profitability: In the fiscal year ending December 31, 2022, the gross profit was approximately USD 3.75 million, compared to USD 2.50 million in the previous year, resulting in gross profit margins of approximately 8.4% and 11.2% for 2022 and 2021, respectively. The decline in the gross profit margin was mainly due to increased grocery costs and sales markdowns, particularly in Indonesia, where a strategy of offering competitive discounts was implemented to encourage user sign-ups, resulting in a gross profit margin of 2.6% for Indonesia in 2022.
• Improved Net Losses: For the fiscal year concluding on December 31, 2022, WBUY recorded a net loss of approximately USD 6.70 million, as compared to the approximately USD 8.17 million net loss reported for the fiscal year concluding on December 31, 2021. This reduction in net loss can be primarily attributed to effective cost-control measures implemented on operating expenses, with total operating expenses experiencing a modest 3.8% increase, while WBUY's gross profit witnessed a substantial 49.9% increase. Furthermore, an increase in other income contributed to the decrease in WBUY's net loss for the fiscal year 2022.

Key Management Highlights

Risk Associated:

Investment in the IPO of “WBUY” is exposed to a variety of risks such as:

• Impact of Brand and Reputation on Business: The reputation and recognition of the Webuy brand play a vital role in the company's success by attracting customers and suppliers. Negative publicity, especially through social media, can harm the brand, making it essential for Webuy to maintain quality, security, and positive relationships with stakeholders to mitigate such risks and sustain growth prospects. Damage to the brand or reputation may materially affect business operations.
• Challenges in Expanding Product Offerings: Expanding product offerings poses challenges, including unfamiliarity with new product categories, potential quality control issues, and supplier disputes. Establishing efficient relationships with new suppliers while diverting resources to support growth may create management and cost complexities, impacting the success of expansion efforts.
• Limited Operating History and Growth Challenges: With a short operating history since 2019, it's challenging to evaluate WBUY's business and prospects. Rapid past growth may not be indicative of future performance due to factors like increased competition, market changes, and negative perceptions. The company has a history of losses, negative cash flow, and may continue to incur losses in the future. The auditors have expressed concerns about WBUY's ability to continue as a going concern, potentially impacting investor confidence and the ability to raise capital.

Conclusion

WBUY Global Limited (WBUY), an emerging Southeast Asian e-commerce retailer, is set to launch its IPO. WBUY focuses on groceries and travel, operating within the broader e-commerce industry. The company's unique approach to community e-commerce, connecting users on social media platforms, sets it apart in the market. Key highlights include a primary offering of 3,500,000 common shares (or 4,025,000 common shares with the over-allotment option), with the proceeds allocated for strategic purposes like expanding operations, enhancing IT infrastructure, and community development. While the company has not historically distributed dividends, its focus on growth and expansion is evident.

Financially, WBUY has seen impressive top-line growth, with total revenue nearly doubling in 2022, driven by grocery sales expansion in Singapore and Indonesia. Gross profitability improved, and net losses decreased due to cost-control measures. With WBUY the related risks should be considered, which encompass the influence of brand and reputation on business, the complexities involved in expanding product offerings, and WBUY's limited operating history. It's noteworthy that auditors have raised concerns regarding the company's ability to sustain its operations as a going concern.

In conclusion, while WBUY shows promise with its growth and innovative approach, potential investors should carefully assess the risks and consider the company's financial and operational history before making an investment decision. Therefore an “Attractive” rating is assigned to the IPO of WEBUY GLOBAL LIMITED (WBUY), given the available listing price.