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ASC rolling up sleeves to Meat investors’ expectations

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Not many stocks in Pakistan Stock Exchange’s recent history have received the kind of response that Al Shaheer Corporation did at the time of its initial public offering, attracting a share price of Rs95.

Yet, for investors, it was all in vain as five years on, the scrip still trades below Rs20. All the hype around revolutionising the meat industry and tapping the halal market beyond Pakistan didn’t really materialise, apart from the MeatOne brand that company has managed to build.

Mettis Global recently interviewed its CEO Kamran Khalili to discuss what went wrong after the listing and where the company is headed, considering the recent buzz around establishing Pakistan as a major halal meat exporter.

The edited excerpts below have been edited for clarity. 

The company is still at a fraction of its IPO price and there have been hardly any dividends either. Can investors expect to make any return in the near future?

It’s true that our stock is trading at a heavy discount compared to the IPO price and there are multiple reasons for this. First of all, at the time of listing, we had proposed to the Securities and Exchange Commission of Pakistan to set a cap for the transaction. But after the Mughal Steel deal, they had removed the cap in good faith so people get a chance to subscribe. What happened was that the market’s excitement took the price to Rs95 a share, as opposed to the Rs40-45 range that we wished for.

Once the IPO was done, the economic environment was such that exports were uncompetitive as the dollar had been kept fixed. Our major revenues came from selling unbranded exports abroad so that hit us, and even recorded losses for a couple of years. At the same time, we were trying to corporatize which added further to our costs.

Then finally, the Lahore project – which we had forecast would cost around Rs3 billion with one third of it projected to come from internal cash generation – went up to Rs3.8bn while our own revenues had been impacted. As a result, the board decided to shelve the Lahore project for the time being. The PTI government had come to power, adjusted the exchange rate and took other initiatives to boost exports so we started focusing on that while cutting costs wherever possible.

Coming to the investor return part, I can’t really comment about the price as market has its own dynamics but as far as value creation is concerned, you will see improvement in every quarter going forward.

Is ASC looking to tap market through e-commerce? What kind of customer response have you noticed?

We are actively looking at the e-commerce channel and already have our own app for this purpose, with delivery handled by Bykea. Further, Daraz Mart, Panda mart and other leading platforms stores are working as third-party online distribution channels for us. This model better suits the business as the fraction of sales that we pay as commissions is still lower than the operational cost of physical stores. However, the company still hasn’t seen any overwhelming response from the side of consumers.

How did Covid-19 impact your sales?

Since meat is an essential commodity, the business was least responsive to the economic impact of Covid-19 outbreak at the domestic level whereas in the international market, exports to the Middle East grew due to border restrictions in Australia, Brazil, Argentina, which are some of the biggest players in this industry, and created some openings for us to fill in.

Can you tell us about the revenue mix from the main product lines and how their margins differ? Are there any plans to change the composition?

Unbranded meat export is the single-most important contributor to the company’s topline, occupying around 70-75% of the share while the remaining 25-30% comes from local sales. That in turn is divided into MeatOne bringing in roughly 60-70% whereas the rest comes from B2B and Khaas. The former alone has immense potential and is growing rapidly; in fact, in two years, it should reach the size of MeatOne. Margins-wise, Khaas is the lowest, falling within 10-12%. That’s because people are still habitual of buying meat from conventional sources (local slaughterhouses) without having any quality check and therefore are much cheaper. That is the major bottleneck for Khaas but we believe with the passage of time (in 5-10 years), the behaviour will change and people will start demanding better service and quality that our brand offers.

Please tell us about ChefOne and how do you plan to add value through this brand?

The project had been in our pipeline for a long time and the idea is simple: we want to bring frozen products according to the desi palette. Currently the market is saturated with respect to nuggets etc with a clear leader that has amassed that position over decades. So, to make your way, one has to do product differentiation.

All types of meat products – chicken, beef, seafood – would be offered through this project, branded as ChefOne, and we have divided them into core, innovator and disruptor categories. The range will not be limited to just snacking items. The company is on its toes to make the product available at all locations as per demand, and for the major arrangements have been made such as the procurement of freezers. Initially, the products will be available at 2500 leading stores of Pakistan and for these alliances are in progress and we expect to generate Rs2-2.5bn in revenue over the first year of commercial operations.

MeatOne started providing online Ijtimai Qurbani on the eve of Eid-ul-Adha last year and ran into some troubles. What measures have been taken to improve the service?

We are offering the same service for the coming Eid-ul-Adha as well. What happened last year was that we had three-hour time slots for customers to manage the load but the majority arrived in the same 30-minute slot, which led to congestion in the stores and queuing outside in the heat. In order to avoid the same situation, the team has booked three marriage halls in the vicinity of Gulshan Iqbal, DHA and Nazimabad so there is ample space and the buyer doesn’t have to stand outside under the sun.

With respect to the financials, we earn an additional revenue of around Rs300 million during the season. Last year was obviously an exceptionally better year as Covid-19 was at its peak and people were avoiding mandis. The company managed to do 15,000 qurbanis, which was a massive increase from the year before. However, for the upcoming Eid, maintaining that same trajectory is going to be difficult as normalcy has returned with respect to restrictions.

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Posted on: 2021-07-09T14:02:00+05:00

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