Freedom Foods Group Ltd (ASX: FNP) has plans to accelerate its growth, is it a buy?
Freedom Foods is a food company that was started in 1986 with a focus on making nutritious and healthier food and beverages. It started with products in soy, rice milks and breakfast drinks. Some of its brands include Freedom, Milk Lab, Crafted Blends, Messy Monkeys, Australia’s Own, So Natural, and Goodness.
What’s Going On At Freedom Foods?
The food company is raising $130 million. There are two parts to the raising, the first is a $65 million raising from existing shareholders for 1 new share for every existing 18 shares owned at an offer price of $4.80 per new share.
The second part is an institutional raising of new shares at the same price of $4.80 to raise $65 million.
The offer price represents a 5.5% discount to the (volume weighted) average share price over the past 20 trading days.
One of the leading investors in Freedom Foods, Arrovest, has already committed to take up its full allocation of the offer.
In terms of what the money will be used for, some of the money will be used to accelerate of its capital expenditure programs in nutritional ingredients through 2019 and 2020 of $100 million.
Another $30 million will be used to support increased working capital requirements to meet demand growth.
Freedom Foods Outlook
Freedom Foods said that it is increasingly well positioned to strategically build into becoming a major international food and beverage business with scale.
The company said that it can grow from both organic developments and leveraging its acquisitions. It said its growth strategy requires significant investment and patience, but its operating profit will increase through the investment cycle whilst keeping its other expenditure in mind (people, systems and so on).
The opportunity for Freedom Foods is very large with how interested the Asian market is in Australian products, but I’m not sure what the best price to pay for Freedom Foods is. The shares in the free report below might be better ideas.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.