Bio-tech firm sees chance for fruitful float

BioVittoria's Chinese president Lan Fusheng with a crop of Luo Han. Photo / Supplied

Hamilton-based bio-technology company BioVittoria is hoping investors will see a sweet opportunity in its sharemarket float.

The six-year old business yesterday released details of a $20 million initial public offer which will list on the NZX on December 2.

The company produces a natural no-calorie alternative to sugar called PureLo from a fruit called Luo Han which is grown only in China.

It wants the money to buy more fruit, pay debt and expand its business into the United States where it is hoping to gain interest from big food and beverage companies.

The initial public offer closes on November 25. BioVittoria will have a market cap of $62 million after the float if the entire $20 million is raised.

Founded in 2003 by former HortResearch scientist Garth Smith and American businessman Stephen LeFebvre, the company has the backing of venture capital firm Endeavour Capital, the New Zealand Venture Investment Fund, ACC and Sir Stephen Tindall's K1W1 fund.

Chief executive David Thorrold said BioVittoria felt it was a good time to list: "People have been hunkering down but now there is some optimism I think people are looking for opportunities like this."

BioVittoria had raised US$7.5 million from Kiwi investors last year to set up a factory in Guilin and now it had its supply chain established the company was ready to take advantage of a trend for alternatives to sugar.

Thorrold said the business already had its sweetener in food produced by Pepsi, Kelloggs and Nestle and estimated the world sweetener market was worth US$50 billion ($68 billion).

It was hoping to gain FDA approval in the United States in February which would help open more doors into the food and beverage industry, he said.

ING equity investment analyst Craig Brown said the offer looked interesting but it was at the higher end of the risk spectrum for investors.

Brown said marketing would be required to convince consumers to switch to PureLo and it was not clear whether companies like Pepsi or Coke would pay for that. Brown said it was also difficult to know whether consumers would pay a premium price.

One market commentator said the listing could be too soon and because of the risks involved the company should still be raising money from private equity investors.

There were also concerns that BioVittoria had been pressured into the listing because of a condition on its capital raising last year.

Andrew McDouall, managing director of McDouall Stuart, which is the lead manager on the offer and also undertook the capital raising, said listing was not a condition of the capital raising but the company would have had to start paying interest to investors by September 30 if it had not been in the process of the public offer.

McDouall said the incentive to list had been his idea. He believed the float was a chance for investors to come in at an early stage. "If we waited six months they could have all the regulatory approvals but would pay more. It's a risk return trade-off. There are many investors that want to get in at the ground floor of great opportunities rather than paying top dollar from a private equity firm."

The company is forecasting a loss for its first three years followed by a net profit of US$1.4 million in 2012 and US$4.36 million in 2013.

LUO HAN

* A type of melon native to China.
* Grows only in southern China
* Chinese Government has banned it from being grown outside the country.
* The fruit isn't eaten but is dried and used in teas as a sweetener and for health remedies.
* In China it is called the longevity fruit and has been eaten for more than 800 years.
* BioVittoria sources the fruit from 5000 farmers and hopes to have a capacity to produce 250 tonnes a year.
* BioVittoria president and man on the ground in China Lan Fusheng is considered to be the national expert in Luo Han production.