IPO Report: Fuling Global’s (FORK)

Francis Gaskins |

Fuling Global IPO, Fuling Global IPO price, Fuling Global IPO date, stocks to buy now, IPOs this week, small-cap stocksFuling Global’s (FORK) environmentally conscious disposable plastic food service products are used by McDonald's (MCD) , Subway, Wendy’s (WEN) , Burger King (BKW) , KFC (YUM) (China only), Walmart (WMT) , McKesson (MCK) , Woolworths, and more than one hundred other customers. The company is based in Wenling, China.

Five other companies are scheduled for the week of Sept. 28. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Burnham Securities
Co-managers: None

End of lockup (180 days): Tuesday, March 29, 2016
End of 10-day quiet period: Sunday, October 11, 2015

Analyst report estimate: neutral

FORK scheduled a $30 million IPO with a market capitalization of $100 million at a price range midpoint of $6 for Thursday, Oct. 1, 2015 on Nasdaq.  Best efforts.

Fuling Global’s (FORK) IPO Summary

FORK’s environmentally conscious disposable plastic food service products are used by McDonald's, Subway, Wendy’s, Burger King, KFC (China only), Walmart, McKesson, Woolworths and more than one hundred other customers.

Fuling Global’s (FORK) Valuation

Glossary
Pre-IPO grade-score summary
http://gaskinsco.com/scr-rate.htm
Many IPOs in today’s environment are graded C+ and scored 7.
If the pre-IPO grade is below C+ or the score is below 7,
then our analysts may have some concerns about the company’s
outlook and/or its market segment.
If the pre-ipo grade is above C+ or the score is above 7,
then our analysts believe the company’s overall business outlook is very favorable.
C = unprofitable, C+ = profitable

Accumulated deficit (mm)

.

.

$8

     

Per share dilution

.

.

-$3.15

     

-------------------------

         

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Fuling Global (FORK)

$100

1.1

11.7

1.9

2.1

30%

             

Fuling Global’s (FORK) IPO Conclusion

Buy, C+, 6

11.7 P/E, 1.1 price to sales

35% gross proft

14% tax rate

9.4% net profit

Price to book of 1.9

Fuling Global’s (FORK) Business

FORK’s environmentally conscious disposable plastic food service products are used by McDonald's, Subway, Wendy’s, Burger King, KFC (China only), Walmart, McKesson, Woolworths and more than one hundred other customers.

If you are like the average American, you have probably already used FORK’s products.

According to a recent Gallup Consumption poll, more than 80% of Americans eat fast food at least once per month.

During the year ended December 31, 2014, FORK had

(a) more than 100 customers that each accounted for less than 1% of its total revenues;

(b) 12 customers that each accounted for 1% to 3% of its total revenues;

(c) 6 customers that each accounted for 3% to 5% of its total revenues;

(d) 2 customers that each accounted for 5% to 7% of its total revenues;

(e) 4 customers that each accounted for 7% to 10% of its total revenues; and (f) no single customer that accounted for more than 10% of its total revenues.

During the year ended December 31, 2013, FORK had (a) more than 100 customers that each accounted for less than 1% of its total revenues; (b) 12 customers that each accounted for 1% to 3% of its total revenues; (c) 2 customers that each accounted for 3% to 5% of its total revenues; (d) 0 customers that each accounted for 5% to 7% of its total revenues; (e) 3 customers that each accounted for 7% to 10% of its total revenues; and (f) 2 customers that each accounted for more than 10% of its total revenues.

Although FORK does not always have written contracts directly with its quick service restaurant (“QSR”) customers, when FORK does, FORK typically signs contracts with terms of between one and four years. FORK’s expectations are from the commitments based on these contracts and past course of dealing. However, FORK cannot guarantee that sales in the future will be at the same rates as in the above paragraph.

In addition to serving these QSR customers, FORK also provides its products to international supermarket and retail stores, international plastic food service product dealers, manufacturers and small and medium-sized wholesale dealers.

Based on revenues, in 2014, FORK sold approximately 92.87% of its products in the United States, 2.33% in Europe, 1.46% in Australia, 1.45% in Canada, 0.92% in Central and South America, 0.82% in the Middle East, and 0.15% in China.

World price of crude oil may impact of profitability

The price of FORK's products’ main raw material is closely associated with that of crude oil. Fluctuating oil price impacts not only the cost of plastic resin, but also transportation costs.

Normally, customers and FORL mutually agree to adjust the price according to raw material price fluctuation. However, if FORK is unable to do that in future, oil price fluctuation will impact profitability.

Fuling Global’s (FORK) Intellectual Property

FORK holds a number of trademarks and patents. FORK relies on its technology patents to protect its business interests and ensure its position as a pioneering manufacturer in its industry.

FORK has placed a high priority on the management of its intellectual property. Some products that are material to its operating results incorporate patented technology.

Patented technology is critical to the continued success of its products. However, FORK does not believe that its business, as a whole, is dependent on, or that its profitability would be materially affected by, the revocation, termination, or expiration of, or infringement upon, any specific single patent.

Fuling Global’s (FORK) Competition

Concentration in the foodservice disposables industry varies widely within specific market segments, with some segments dominated by a small number of producers.

For example, Dart Container is the leading supplier of plastic foodservice beverage cups, followed by Pactiv and Berry Plastics.

By contrast, the market for cutlery is more fragmented, with a growing portion of the market supplied by contract manufacturers in China.

Among U.S.-based suppliers of foodservice disposable cutlery are Berry Plastics, D&W Fine Pack, Dart Container (including Solo Cup), Georgia-Pacific, Maryland Plastics, Pactiv, and Waddington Group.

Most of these firms offer a number of different cutlery lines and are diversified into the production of straws and other foodservice disposables.

In April 2012, D&W Fine Pack expanded its cutlery and straw offerings through its acquisition of Jet Plastica Industries.

00Prior to the acquisition, Jet Plastica claimed to be the largest manufacturer of straws in the U.S. Other suppliers of foodservice straws include Cell-O-Core, Earth Straws, New WinCup, Pactiv (via Spirit Foodservice), Rockline Industries, Royer, StalkMarket Products, and Stone Straw (Wentworth Technologies).

Fuling Global’s (FORK) 5% Shareholders Pre-IPO

Guilan Jiang                 47.5%

Sujuan Zhu                       19.0%

Qian Hu            9.5%

Xinzhong Wang 9.5%

Jinxue Jiang      9.5%                

Fuling Global’s (FORK) Dividends

No dividends are planned.

Fuling Global’s (FORK) IPO Use of Proceeds

FORK expects to receive $27 million from its IPO and use it for the following in millions:

Operation of Allentown factory and development of U.S. sales network   $5.7                             Development of Allentown factory                         $3.3     

Purchase of land for new factory in Wenling                              $8.0

Construction costs for Wenling Factory – Phase I                                  $5.0

Purchase of Equipment and Machinery – Phase I                                   $4.0

Research and Development – Process Automation                     $1.0

Working capital for operation in Allentown                     $4.5

Marketing and distributor relationship development         $0.7    

Sales employee recruiting and training                           $0.5

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
MCK McKesson Corporation 141.62 -3.78 -2.60 4,363,825
WMT Wal-Mart Stores Inc. 70.60 0.74 1.06 6,966,249
FORK Fuling Global Inc. 2.35 0.05 2.17 16,817
YUM Yum! Brands Inc. 64.44 0.98 1.54 2,654,989
MCD McDonald\'s Corporation 119.92 0.67 0.56 4,059,907
WEN Wendys International Inc. 13.59 0.60 4.62 6,275,034

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