THE meat business is turning into a rage in the fast moving consumer goods sector. One of the largest exporters of ‘halal’ meat in the country is about to go for public listing.

The Al Shaheer Corporation Ltd will be the sixth company to turn to the capital markets to mobilise funds so far this year.

Last week, Al Shaheer offered 18.75m shares via book-building to institutional and high net worth individuals (HNWI) at a floor price of Rs43 per share. Najam Ali, CEO of Next Capital — a joint book builder along with AKD Securities — told Dawn last Thursday that at the close of bidding time on June 11, the company had received bids for 54m shares.

And against the floor price of Rs43, the strike price was worked out at Rs95 per share, which comes up to 35 times the company’s current earnings. The entity is expected offer another 6.25m shares through an initial public offering four weeks from now.

It has dawned upon entrepreneurs only lately that the growth-oriented and non-cyclic meat business provides mouth-watering returns. And new entrants have chosen just the opportune moment. In the budget 2015-16, the government has allowed a tax holiday of four years to new ‘Halal’ meat producers who set up their facilities and acquire ‘Halal certificates’ by December 2016.

Al Shaheer’s export sales constitute 77pc of its total sales, with the UAE, Qatar, Bahrain, Egypt, Oman, Kuwait and Saudi Arabia being the primary export markets

Another major entrant to the sector is a ‘halal’ meat producing subsidiary of Fauji Fertiliser Bin Qasim Ltd (FFBL).

Established in 2008, Al Shaheer is a relatively new player in the industry. Its export sales constitute 77pc of total sales, with the UAE, Qatar, Bahrain, Egypt, Oman, Kuwait and Saudi Arabia being the primary export markets. And the company is seeking approvals to export its products to Malaysia and some other markets with high-return possibilities.

Market sources say Pakistan’s meat exports rose by 9.5pc in financial year 2014, reaching a record high of $230m, with a 10-year compounded annual growth rate (CAGR) of 29.1pc and four-year CAGR of 35pc. Al Shaheer has a roughly 16pc share in the country’s halal meat exports, say sector analysts.

With Pakistanis being the third-largest consumers of goat meat and the ninth-largest beef-eaters in the world, there is plenty of local demand to attract corporates into the sector, as their only competitors are traditional butchers.

Besides selling its products abroad, Al Shaheer also caters to local retail and institutional clients. It has a network of 43 outlets in major cities of the country, which market the company’s meat products under the ‘Meat One’ and ‘Khaas’ brands.

According to its share offering documents, Al Shaheer said Meat One, a chain of specialty meat shops, was introduced in 2010 after the company saw immense potential for modern and upscale butchers’ shops, as around 95pc of the meat is sold through roadside vendors in the country.

The company plans to increase the number of outlets to 101 within the next four years. “Pakistan’s total meat consumption is estimated at worth Rs1.44trn, while ‘Meat One’ expects [its] FY15 revenue at Rs1bn or 1pc of the total consumption, signifying growth opportunities,” its prospectus said.

However, competition is likely to grow in the export segment, where 14 players currently occupy the market. But stock broker-turned-entrepreneur Kamran Khalili, the chairman and CEO of Al Shaheer, isn’t worried. He recently said that the market is so huge that even 50 players can compete and eke out a profit.

However, analysts believe that when FFBL’s meat subsidiary becomes operational, it could give Al Shaheer a tough time, as it would enjoy the tax holiday benefit announced in the FY16 budget. Another risk that some analysts point out is the company’s rising debts. Yet those are balanced by the benefits.

“Owing to its involvement in the ‘halal’ meat production, the company is exempt from sales tax on both local and international sales. Moreover, its income from exports is taxed at a favourable rate of 1pc against the normal rate of 33pc for the corporate sector,” mentioned one analyst.

Since 77pc of the company’s sales are dollar-denominated, it provides a partial hedge to the rupee’s recent devaluation, which would consequently reduce currency exposure for international investors, a fund manager pointed out.

Meanwhile, the company is believed to use the proceeds from the IPO for mainly three purposes. Firstly, it is planning to set up a vertically integrated poultry enterprise, from hatchery to the final production stage, in Lahore. Secondly, it is aiming to increase its retail network. And thirdly, it will utilise the funds to meet its working capital requirements.

Market sources suggest that poultry consumption in the country stands at around 834,000 tonnes a year, placing Pakistan among the world’s 20 top chicken consumers.

“Although the poultry project is expected to come online by June 2017, given the recent government incentives for plants set up till December 2016, Al Shaheer may bring this project forward,” mused Zafar, an analyst at BMA Capital.

The company released its financial accounts for the previous three-and-a-half years, which show that its total assets had reached Rs1.96bn by December 2014. Its paid-up capital was Rs287m.

During FY14, the company’s profit-after-tax amounted to Rs73m, which translated into earnings-per-share of Rs2.80, on sales worth Rs4.44bn. For the first six months of the ongoing fiscal, its after-tax earnings came in at Rs116m, leading to eps of Rs4.05.

Published in Dawn, Economic & Business, June 15th, 2015

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