Have you tried fragrances from "Vanzo" or "Vanscent"? Both brands are part of Vanzo, which has quickly become Malaysia's largest local fragrance company since its launch in 2018, trailing only behind global giants Procter & Gamble and Johnson & Johnson.

Now, Vanzo is preparing to go public. Let’s evaluate the investment potential of this rising star by examining its IPO details, business model, industry growth, and financials.

IPO details

Let's take a look at Vanzo's IPO details. Sponsored by M&A Securities, Vanzo is offering 93.35 million shares, with 25% available for public subscription. The offering price is set at RM 0.15, with the subscription period running from November 27 to December 4, 2024. The company plans to list on December 17.

Business model

Vanzo's business model encompasses its main products and brands, key markets and sales channels, and revenue sources.

Vanzo focuses on air fresheners, including car and home fragrances, as well as personal and household care products.

The company operates its own brands, Vanzo and Vanscent, along with third-party brand Copperx.

Though primarily based in Malaysia, Vanzo also sells in Singapore, Brunei, and Australia. Its products are distributed through wholesalers, retailers, and five owned retail locations, as well as online via platforms like Shopee and Lazada.

In fiscal year 2023, car fragrances made up nearly 80% of revenue, indoor fragrances contributed 17.6%, while personal and household care products accounted for less than 3%.

Industry Overview

A company's growth potential is largely influenced by the market size, growth rate, and competitive dynamics of its industry.

Market size and growth

Nielsen reports that Malaysia's fragrance market expanded from RM 240 million in 2021 to RM 299 million in 2023, with a compound annual growth rate (CAGR) of about 10.7%. It's projected to grow to around RM 388 million by 2026, with an expected CAGR of 9.0% from 2024 to 2026.

Competitive landscape

The market is highly concentrated, with the top ten players accounting for 87.5% of the share. Procter & Gamble and Johnson & Johnson dominate with over 60%, while Vanzo, the leading local brand, holds approximately 13.3% and benefits from strong brand recognition.

In summary, Malaysia's fragrance market is small but steadily growing, providing a promising environment for emerging companies like Vanzo.

Financial data

A company's operational excellence and the industry's growth potential are ultimately reflected in its financial performance.

Performance

• Revenue: Vanzo's revenue grew from RM 22.79 million in FY 2021 to RM 40.85 million in FY 2023, marking an increase of nearly 80% over two years, with a compound annual growth rate (CAGR) of approximately 34%.

• Adjusted Net Profit: Vanzo's adjusted net profit rose from RM 2.16 million in FY 2021 to RM 5.10 million in FY 2023, more than doubling with a CAGR of 53.4%.

Profitability

• Gross Margin: Vanzo's gross margins were 43.3% in FY 2021, 44.9% in FY 2022, and 46.7% in FY 2023, showing a steady upward trend.

• Adjusted Net Margin: The adjusted net margins were 9.5% in FY 2021, 12.4% in FY 2022, and 12.5% in FY 2023, maintaining stability after a significant increase in 2022.

• Return on Equity (ROE): Based on adjusted profits, Vanzo's ROE was 54.4% in FY 2021, 57.9% in FY 2022, and 55.7% in FY 2023, consistently high at around 55%.

Overall, Vanzo has demonstrated rapid revenue and profit growth over the past three fiscal years while maintaining strong profitability metrics.