The Offer

Company Overview

On April 8, 2019, the Company was established as a proprietary company to find, acquire, and grow commercial interests in Australian glass production. The Group's two primary operating divisions are SSG and MSGF. Through MSGF, the provision of glass contracting solutions targeted at providing developers and construction companies (both small and large), SSG manufactures and supplies a wide array of custom-made and architectural glass products to commercial and private construction customers, encompassing the full range of safety, security, fire protection, noise reduction, and energy efficiency solutions for use in residential homes and commercial buildings in Australia.

Key Highlights

Primary Offering: The Company is accepting applications for 14,285,714 Shares at a price of AUD 0.35 per Share under this Prospectus to raise AUD 5,000,000 (before costs). To raise an additional AUD 2,500,000, the Company may accept oversubscriptions under the Offer for up to an additional 7,142,857 Shares at an issue price of AUD 0.35 per Share (before costs).

Use of proceeds:

Dividend policy: The Directors will ultimately decide whether to pay dividends in the future, and their verdict will be grounded on a variety of factors, including the availability of distributable earnings, operating performance, the financial status of the Company and its subsidiaries, potential for future growth, capital requirements, general economic conditions, and other relevant factors. The Company plans to increase revenue and make profits over the two years after the date of this Prospectus, but it expects to incur considerable costs during the expansion phase. Considering this, the Company does not anticipate declaring any dividends during that time.

Industry & Market Overview:

• The Group engages in business throughout Australia in the building and construction industry, specifically in the manufacturing and contracting of glass and glass-related products. The flat glass segment includes a range of glass products that are processed for several uses in the residential and non-residential building industry, including flat glass, architectural glass, and structure-upgraded glass products.
• 5% of industry enterprises are in New South Wales, Victoria, and Queensland, which roughly matches the distribution of the population and economic activity. With one-third of the market share, New South Wales dominates the market and is home to several large-scale glass factories. Victoria has the second-highest market share, and there are numerous downstream fabrication companies working nearby. The industrial firms in Queensland, which are mostly made up of wholesale agents who purchase processed glass products from other states or by imports, broadly match Queensland's market share of the sector.
• Despite recent stagnation in market size, industry revenue is anticipated to grow at an annualized 1.9% rate over the next five years to reach AUD 3.8 billion. Over the next five years, it is projected that overall demand for flat glass goods will remain restrained, but that demand for architectural glass would progressively rise in tandem with the recovery of the residential building markets.
• The graph below shows that 55.8% of industry income comes from the building construction market, which includes glazing contractors, non-residential construction companies, residential construction companies, and households. The SSG and MSGF operations of the Group serve these active market areas.

Financial Highlights (Expressed in AUD): H1FY22

• Increasing revenues: The company's sales increased from AUD 2,853,040 in H1FY21 to AUD 5,116,815 in H1FY22, as shown in the table above, representing an increase of almost 79.35% because of the increasing demand for its products.
• Better gross margin: In the H1FY22, the company's efforts to lower its cost of goods sold compared to the revenues was successfully executed, as its gross margin rose to almost 30.80% in H1FY22 from 11.92% reported in the same period of the previous financial year.
• Enhanced profitability efficiency by decreasing net losses: The company has been successful in bringing down the net losses to AUD 679,826 in the second half of FY22 compared to AUD 2,076,938 in the first half of FY22.

Key Management Highlights

Risk Associated (High)

Investment in the IPO of “AG1” is exposed to a variety of risks such as:

• Business model rollout: There is a chance that the Group's management won't be able to carry out its expansion strategy following the conclusion of the ASX offering. The Group's operating and financial performance may be impacted by management's ability to effectively implement and manage the Group's strategic direction.
• Operational risk: In its current and future operations, the Group is exposed to a variety of operational risks. These risks include equipment failure, failure of information technology systems, and failure of external services, all of which could significantly harm the Group's performance.
• Stiff competition: Price reductions, reduced margins, and market share losses due to aggressive industry competition from current or potential rivals could negatively impact the Group's growth prospects, operating results, and financial performance. Because of the competitive nature of the sector, there can be no assurance that the Group will be able to compete successfully against both present and upcoming competition.

Conclusion

The company reported healthy performance in the first half of FY22 with revenues, gross margin, and net losses have all improved during the period under consideration; as a result, it is anticipated that AG1 will have opportunities to expand and grow using IPO funds in the future and eventually turn its business with positive net income and free cash flow to finally grow organically. The industry in which AG1 operates has good opportunities for the companies which operate with good fundamentals and some competitive edge. Also, the recent surge in the company’s products demand posing well for a long-term positive outlook.

Hence, Australia Sunny Glass Group Ltd. (AG1) IPO looks “Attractive for High-Risk Appetite Investors” at the IPO price given the associated risks.

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