Uni-Fuels Holdings (UFG) ipo

Singaporebased marine fuel provider UniFuels Holdings files and sets terms for a $14 million US IPO
UniFuels Holdings, a Singaporebased provider of marine fuels, filed on Monday with the SEC to raise up to $14 million in an initial public offering.
The company plans to raise $14 million by offering 3 million shares at a price range of $4 to $5. At the midpoint of the proposed range, UniFuels Holdings would command a market value of $149 million.
UniFuels markets, resells, and brokers marine fuels products to shipping companies and marine fuels suppliers worldwide inport and offshore. The company operates an integrated business model where it serves customers through two segments: sales of marine fuels solutions, where it controls and manages the customer relationship throughout the entire transaction and provides valueadded solutions such as trade credit and financing; and brokerage, where it refers the customer to a thirdparty supplier in exchange for a brokerage fee.
UniFuels Holdings was founded in 2021 and booked $131 million in revenue for the 12 months ended June 30, 2024. It plans to list on the Nasdaq under the symbol UFG. The company filed confidentially on May 3, 2024. R.F. Lafferty & Co. is the sole bookrunner on the deal.

Uni-Fuels Holdings (UFG) Company profile

Company Overview
Name: UniFuels Holdings (UFG)
Industry: Energy / Fuel Production and Distribution
Mission and Vision
Mission: To provide reliable and sustainable fuel solutions while promoting environmentally friendly practices.
Vision: To be a leader in the energy sector, innovating and adapting to changing market demands and sustainability goals.
Key Services
1. Fuel Production: Refining and processing of various fuel types.
2. Distribution: Efficient logistics to deliver fuel to customers.
3. Marketing: Retail operations through service stations and partnerships.
4. Sustainability Initiatives: Investment in alternative fuels and green technologies.
Market Position
Target Markets: Retail consumers, industrial sectors, and commercial clients.
Competitors: Other fuel producers and distributors, both local and international.
Future Outlook
Expansion Plans: Potential growth areas, such as renewable energy investments or geographic expansion.
Innovation: Commitment to research and development in fuel efficiency and sustainability.
UniFuels Holdings (UFG) typically operates in the energy sector, focusing on the production, distribution, and marketing of fuel and related products. Companies like UFG may be involved in various areas, including:
1. Fuel Production: Refining crude oil into various fuels such as gasoline, diesel, and jet fuel.
2. Distribution: Transporting fuels to retailers, industrial users, and other end consumers.
3. Marketing: Selling fuel products through branded service stations or directly to businesses.
4. Sustainability Initiatives: Developing alternative fuels or engaging in environmentally friendly practices to meet regulatory standards and market demands.

IPO Details For Uni-Fuels

Uni-Fuels intends to raise $13.5 million in gross proceeds from an IPO of its Class A ordinary shares, offering 3 million shares at a proposed midpoint price of $4.50 per share.
There have been no existing investors or potentially new shareholders who have indicated an interest in purchasing shares at the IPO.
Class A shareholders will have one vote per share and the company founder, who will own all Class B shares, will have ten votes per share and will have majority voting control of the company post-IPO.
The S&P 500 Index doesn’t admit companies with multiple share classes into its index.
With a successful IPO, the company’s enterprise value would be approximately $133 million, not including the effects of underwriter over-allotment options.
The float to outstanding shares ratio (outside of underwriter over-allotments) is expected to be approximately 9.1%, which means the stock will be a ‘low float’ stock subject to higher volatility in early trading.
Dilution in net tangible book value per share for investors in the IPO is expected to be $4.02, well within the typical range at IPO.
Management disclosed it intends to apply the net proceeds from the IPO as follows:
Approximately 80% for scaling up our reselling activities to gain market share from existing and new markets;
Approximately 15% for strengthening our workforce and expanding our market presence in new geographical locations; and
Approximately 5% for cash reserve and general corporate purposes.
(Source – SEC)
The company’s online roadshow is not available.
Regarding outstanding legal actions, the leadership said the company is ‘currently not involved in any legal proceedings.’
The sole listed book runner of the IPO is R. F. Lafferty & Co., Inc.

Uni-Fuels’ IPO faces problems

Uni-Fuels’ IPO Suffers From Low Margins And Extremely High Valuation
UFG is seeking a U.S. IPO market investment to fund its global expansion plans.
The company’s financials have generated increasing topline revenue, recently elevated gross profit but lower gross margin, falling operating profit and fluctuating cash flow from operations.
Free cash flow for the twelve months ended June 30, 2024, was $761,509.
Selling & Marketing expenses as a percentage of total revenue have been nominal; its Selling & Marketing efficiency multiple rose to 231x in the most recent reporting period.
Uni-Fuels says it plans to pay no dividends and will keep any earnings for its growth and expansion initiatives. The company is also subject to various restrictions on the payment of dividends due to its incorporation in the Cayman Islands.
UFG’s recent capital spending history shows it has spent moderately on capital expenditures as a function of its operating cash flow.
The market opportunity for marine fuel sales is large but expected to grow only moderately in the coming years.
The company faces a fragmented industry and global operations complexity.
Risks to the company as a public company include its ‘controlled company’, ‘foreign private issuer’, and ’emerging growth company’ status, which will enable management to disclose substantially less information to shareholders.
The performance of many such company stocks has been poor post-IPO.
Asia-based companies have been particularly characterized by minimal communication with shareholders.
Here is a table of various capitalization and valuation figures for the firm:

(Glossary Of Terms)
(Source – SEC)
Management is seeking an Enterprise Value/EBITDA multiple of approximately 210x on extremely low operating and net income margins, an extremely excessive valuation multiple for even a high-margin company.
Given the firm’s ultra-low margin profile, high regulatory uncertainty, fragmented competition and excessive valuation expectations at IPO, my outlook on the UFG IPO is to sell (avoid it).