Having your cake and eating it too: Lester Yu to wipe out P64M Fruitas’ pandemic loss from Balai IPO

You got to hand it to the entrepreneurial mind of Lester Yu to cook up creative ways on how to prop up his loss-making Fruitas Holdings (FRUIT) amid the pandemic.

Just weeks after abandoning FRUIT’s move to branch out into healthcare, Yu announced his plan to raise as much as P309 million from the initial public offering of the listed firm’s wholly-owned subsidiary, Balai ni Fruitas Inc., on the Philippine Stock Exchange SME board before 31 March 2022.

From ‘extreme excitement’ to ‘distraction’: Red-faced Lester Yu scraps Fruitas’ purchase of obscure clinic owned by CFO’s mom

Up to P65 million of Balai’s IPO proceeds (325 million primary and 87.5 million secondary shares will be sold at a maximum offer price of 75 centavos each) will go to FRUIT which, coincidentally, lost the same amount from 2020 to 30 September 2021.

But Yu’s latest fundraising concoction has left a bad taste in the mouth of a Babbler who pointed out that FRUIT and its bakery unit Balai were practically the same banana.

“If FRUIT is not making money, why list Balai? Is this a fundraising exercise to make up for the losses of FRUIT in 2021 and 2020? They should fix what they have now by improving sales first,” said the Babbler.

Defensive! Lester Yu justifies Fruitas’ purchase of obscure health clinic owned by CFO’s mom

Yu himself admitted that Balai’s IPO would be “beneficial” to FRUIT shareholders. In his press release, Yu puffed up the “significant growth prospects of the bakery sector.” He also made a big deal out of multiplying Balai’s stores from five to 23 in just four months after taking over the brand in June 2021. (The Balai portfolio includes Buko ni Fruitas and House of Desserts).

Aside from its losses, the Babbler said FRUIT’s stock has been mostly a stinker since its IPO debut in November 2019. It was last traded at P1.22, down 27 percent from its offer price of P1.68 per share.

Lester Yu to acquire P165M worth of properties for Fruitas HQ, commissary

“There are companies that lose money but their stock price continues to go up, that’s because the market and the investors believe it will make big money in the future, like the tech companies,” the Babbler said.

“But Fruitas is an old brick and mortar story which is affected and will be affected, by the pandemic. Furthermore, the bread-making business is crowded with big players like Pan de Manila,” the Babbler added.

Yu planned to use the P244 million primary proceeds from Balai’s IPO to bankroll its branch expansion, put up its own commissary, and buy “other baked goods firms to broaden the company’s current product offerings.”

The Babbler, however, is taking Yu’s spending plans with a grain of salt. The Babbler reminded investors that the businessman had used P142 million or nearly one-fifth of FRUIT’s P824 million IPO proceeds to buy a five-story building in Sta. Mesa, Manila for its headquarters in the middle of the pandemic in 2020.

What would have taken the cake, the Babbler said, was if Yu had proceeded with his plan to buy an obscure clinic owned by the mother of FRUIT’s chief financial officer.

“Who uses their IPO money to buy an office building and then looks into lab testing? It’s like a kid who suddenly has money and wants to buy a fancy car, not just any car,” said the Babbler.