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Oscar Living (OLIV) IPO, Tests the Sturdy of Furniture Issuers

Updated: Apr 8, 2022

Oscar Living will offer IPO shares in the price range of IDR 100 - IDR 125 per share, how do they prepare a strategy to keep attracting investors?, JAKARTA – The company that manages the online furniture store is PT Oscar Mitra Sukses Sejahtera Tbk. (OLIV) has opened the book building phase on Tuesday (5/4/2022), ahead of the planned IPO in May 2022. The target fund that OLIV is aiming for is relatively not as big as what has been recorded with issuers this year, but that doesn't mean that the magnet of this furniture company's IPO can be underestimated.

Based on the prospectus document, OLIV will offer 400 million new shares at a price of Rp. 100 to Rp. 125 per share. This means that the target fund targeted by this issuer is a maximum of IDR 50 billion.

Around 88.22 percent of the funds or a maximum of Rp44.11 billion will be used for working capital in the form of supplies, establishment of warehouse facilities, employee payroll, and marketing.

While the remaining 11.78 percent or a maximum of Rp. 5.89 billion will be used for building renovations and adding to the fleet.

As an illustration, OLIV posted a profit of IDR 525.08 million for the first 10 months of 2021. This means that the company's annual profit is at the level of IDR 630.097 million.

The number of company shares after the IPO is 1.9 billion shares. If divided by annualized earnings per share, then the cash from OLIV is around IDR 0.336 per share.

Assuming the company's IPO share price is Rp. 100 to Rp. 125 per share, then OLIV's annualized PER ratio when it is officially listed on the stock exchange is in the range of 297.61x to 372.02x.

As a comparison, currently the stock exchange has at least seven issuers that are specifically engaged in the furniture business.

Of this number, there are only two issuers that tend to have a PER valuation equivalent to more expensive than the OLIV projection, namely PT Boston Furnitures Industries Tbk. (SOFA) with 294.70x and PT Chitose Internasional Tbk. (CINT) with 250x. However, OLIV provides a sweetener to attract capital market investors.

In this IPO, the company promises a bonus in the form of series 1 warrants for investors who are committed to participating in ordering IPO shares.

The latest prospectus states that these warrants will later entitle shareholders to purchase ordinary shares (exercise) at a price of Rp. 10 per share.

The company has also ensured that the number of warrants distributed for free will reach a maximum of 400 million shares, or an equivalent ratio of 1:1 compared to the number of IPO shares.

In short, the company provides an opportunity for IPO players to double their ownership in the future with an exercise price which is only equivalent to 10 percent of the potential minimum IPO price (Rp100). As a context, OLIV is not the only one.

Recently, a number of newcomer issuers on the stock exchange that offer high-valued shares have also tried to lure investors with a similar alternative strategy. Some of them were able to seize the attention of market participants.

The last interesting move occurred in the IPO of PT Wir Asia Tbk. (WIRG). This metaverse company, which is connected to a number of conglomerates in the Lippo and Indika Groups, offered warrants at a ratio of 3:1 when it held its IPO on Monday (5/4) yesterday.

As a result, WIRG warrants became a hot item that was selling well by investors. Even when the exercise date of the warrant has not started. As of Tuesday (5/4), for example, WIRG warrants (WIRG-W) were traded by investors at a dowry of IDR 280 per unit.

This price has reflected an increase of 27,900 percent, and is only slightly different from the price of the company's ordinary shares, which is around Rp. 282 per share.

OLIV's management itself believes that the warrants they offer will be a promising option as an investment opportunity for market participants. Moreover, they believe that the online furniture sales sector will continue to record growth from year to year.

"As a company that targets the low-to-mid segment, the company has a very large market share," said OLIV's management.

Panin Sekuritas analyst William Hartanto said the warrants were like a bonus for investors. However, he cautioned that speculative warrants are often dominant in market psychology.

"Because price movements [warrants] are without limits on auto rejection, it creates more speculative action, but the rewards can be bigger when the risk also increases," he told Bisnis.

William said investors should place warrants as a short-term investment tool, aka trading, rather than being kept for too long.

"One of the warrants that took quite a toll was the HELI-W which once reached the price of 1500 and ended at level 9," he warned.

IPO Prospects for Furniture Issuers So far, OLIV has tended to focus more on marketing its products in the Greater Jakarta area.

This is because the majority of their product warehouses are still spread across the capital and buffer zones. However, along with the fresh funds from the IPO, management believes that the reach of the seller

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