RFM Corp: Philippines #1 Ice-Cream and Pasta King and a Revitalized Concepcion Family = The Next Universal Robina Corporation (URC)?
RFM Corp (PSE: RFM) is the #1 ice-cream and pasta maker in the Philippines with a domestic market share of 76-78% and 39-40%, accounting for 27% and 24% of FY14 group sales respectively. It is also the main supplier of bun requirement to McDonald’s Philippines and its high speed bun production business has expanded to serve other quick-serve restaurants (QSR) customers that include Wendy’s and KFC, contributing to 36.5% of group sales. Other consumer brand products include Selecta Fortified Milk (around 8% market share), Selecta Moo chocolate milk, White King cake and sauce mixes, Sunkist juice and tea beverages, VitWater vitamin water, Alo Green Tea, accounting for 12-13% of FY14 group sales. About half of RFM’s retail sales are generated via modern trade while the other half comes from traditional/general trade. Around 98% of RFM’s revenue are generated from domestic sales, with Luzon accounting for more than two-thirds, and about 2% are generated from export sales. Recent corporate activities include the (1) acquisition of #2 pasta brand Royal from Unilever Philippines in Jan 2014, (2) divestment of Swift meat processing business in 2012; (3) divestment of Philtown Philippines in 2013. RFM was incorporated on 16 Aug 1957 as Republic Flour Mills by a group of entrepreneurial families: Concepcion family (33.5% of equity), Server family 7.4%, Segovia family 2.8%. RFM is now led by third-generation leader Jose Ma “Joey” Concepcion who succeeded as CEO since 1989.
1) What Makes It a Wide-Moat Business?
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About The Author: Koon Boon Kee
Koon Boon is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets.
Starting his career at a boutique hedge fund in Singapore and later, at Korea’s largest mutual fund company, Koon Boon started to make headway into the investment arena. In his early successes, Koon Boon was part of the core investment decision committee which achieved 700% in returns (net of fees), in its flagship Asian fund.
A prolific writer and thought leader, Koon Boon has contributed hundreds of articles to Bamboo Innovator and BeyondProxy, an acclaimed series of subscription-based, research-intensive publications for serious investors; and is Managing Editor of the Moat Report Asia, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. He had also presented in top banking and finance conferences in Sydney, Cape Town, HK and Beijing, as well as in the Emerging Value Summit and Wide Moat Investing Summit. His work has been featured in local and international media such as, TEDxWallStreet, Investopia, BeyondProxy, Greatinvestors.tv, Jakarta Post, Straits Times Singapore, TODAY Singapore, Business Times Singapore, as well as a publication in the BoğaziçiJournal.
With the wide occurrences of financial fraud committed by listed firms in China during 2015, Koon Boon went to further his studies, from which he saw a gap in the curriculum for accounting fraud. He went on to pioneer the first-of-its-kind course on Accounting Fraud in Asia, which is now an official course in the SMU curriculum.
Today Koon Boon is the Chief Investment Officer at 8I Holdings Limited, where he is responsible for the sustainable growth and outperformance of listed Asian equities investments in the Hidden Champions Fund.
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