Australian skincare company, EZZ Life Science Holdings Limited (Prospective ASX: EZZ), are the latest small cap looking to list on the exchange this month after a strong FY20 for the company. EZZ life is looking to raise $6M at an offer price of $0.50 per share, giving the company an indicative market capitalisation of $19M after its debut. The offer is expected to formally close on February 12, expecting to list on February 26. 

EZZ Life is the largest distributor in Australia and New Zealand of Eaoron, an Australian skincare brand which is currently sold across pharmacies including Chemist Warehouse and Priceline, as well as supermarkets, and online retailers. EZZ Life estimated that in 2019, Eaoron held an impressive 17.8% – 25.3% of the facial mask market in Australia and New Zealand, indicating strong popularity of the Aussie made products. 

The company is also in the business of developing their own ‘EZZ’ branded skincare line with the intention to distribute their products through the distribution channels already established with Eaoron retailers, effectively giving EZZ Life an enormous advantage over other new and upcoming skincare companies. EZZ is planning to go direct to customers in China through the tmall global platform, China’s largest B2C cross-border online shopping platform. 

EZZ life anticipates that by building the EZZ branded skincare products they will in effect reduce the reliance on the Eaoron distribution department of their revenue, reporting that in FY20, 89% of their revenue was from only 5 customers. Fortunately, the skincare sector is undoubtedly growing, recording a significant 7.2% CAGR in Australia and New Zealand over the past five years, estimated to represent $3.1B in value.

The company reports that their current operations are sufficient for their working capital requirements, which is also reflected in the 0.3% – 0.8% of offer funds being raised allocated to working capital requirements. Accordingly, the company has been currently profitable in FY19 and FY20, which is an uncommon, yet reassuring characteristic to see in an Australian small cap IPO. EZZ life revenue grew by 52% in FY20 compared to the previous financial year, however, recorded almost $1M in NPAT, $340k less than in FY19. 

At the maximum subscription amount of $6M, the company intend to allocate 41% of funds into their manufacturing facility, additional market expansion (22.3%), experimental concept stores (13.3%), costs of the offer (12.8%), R&D (7.5%), software development (2.5%), and additional working capital (0.8%). 

Platinum Gate Proprietary Limited and Lodge Corporate Pty Ltd are acting as Joint Lead Managers. The offer is not underwritten.