Ensogo raises another US$30mil by issuing 183mil new shares

• Makes it a cumulative A$55mil raised over two months
• Funds to be mainly used for customer acquisition and retention

E-COMMERCE company Ensogo Ltd appears to be on a hot streak, at least when it comes to its funding flow, managing to raise A$38-million (US$29.7-million) from institutional investors.
 
The latest funding round, which will be mainly done by the issuance of 183 million new shares, comes just weeks after China’s Vipshop Holdings Ltd acquired a 12.2% stake for approximately A$6.4 million (US$5 million), and WF Asian Reconnaissance Fund Ltd (Ward Ferry) agreed to buy 58.8 million new Ensogo shares for A$10 million (US$7.8 million), at A$0.17 per share.
 
In total, Ensogo has managed to raise some A$55 million (approximately US$43 million) over the past eight weeks.
 
The raising of the latest funds involves a conditional placement of 189 million new Ensogo shares at A$0.185 per share that will raise A$35 million, the company said in a filing with the Australian Securities Exchange (ASX). [A$1 = US$0.78]
 
Meanwhile, Vipshop, which has agreed to exercise its anti-dilution rights, will also subscribe to approximately A$3.1 million worth of new shares at $0.185 per share.
 
Prior to this exercise, Vipshop had about 59.46 million Ensogo shares. Had it not exercised its anti-dilution rights, its stake in Ensogo would have been reduced to 8.1%.
 
The placement price of A$0.185 per new Ensogo share also represents a 7% discount compared with the shares’ closing price of A$0.20 on April 21.
 
Assuming the 189 million new Ensogo shares are placed entirely with the new institutional investors, and not to existing substantial shareholders other than Vipshop, Catcha Group is likely to remain the company’s single-largest shareholder with a 14.42% stake, assuming it did not subscribe to any of the placement shares. It previously had about 21%.
 
This calculation also factors in the 58 million new Ensogo shares to be issued from the Ward Ferry deal.
 
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According to Ensogo chief executive officer Krzysztof Marszalek (pic), the new funds will allow the company to “invest aggressively” in growing its customer base and improving the quality of its service across the region.
 
“On completion of the placement and Vipshop’s top-up, the additional funding will mean that we are well-positioned to execute on the tremendous opportunity our strategic relationship with Vipshop brings, as well as on the enormous opportunity for e-commerce in South-East Asia,” Marszalek said in a statement on April 21.
 
From the A$38 million, A$29 million will be used to fund marketing programmes associated with customer acquisition and retention; A$2 million in capital expenditure related to the ongoing development of Ensogo’s technology platform; and the remaining A$7 million will be used as working capital.
 
Weathered a storm
 
In its filing with ASX, Ensogo said that the placement of new shares was well-received by investors, particularly from “large, global funds based in Asia.” Bell Potter Securities Ltd is the sole lead manager of the placement.
 
The placement, which is still subject to Ensogo shareholder approval, will occur in two stages. The first stage, representing approximately 83 million new shares, will occur shortly after the company’s annual general meeting today (April 22).
 
The second stage, representing 106 million new shares, will occur shortly after a general meeting to be held in late May. The issue of shares to Vipshop is also conditional upon shareholder approval at that general meeting.
 
Ensogo described the raising of the funds as a vote of confidence from its investors. So far this year, its shares on ASX have more than doubled to A$0.20, from A$0.08 early this year.
 
“We believe the recent investments from Vipshop and other large global institutional investors, is recognition of the opportunity Ensogo has to be the dominant flash sales player in South-East Asia.
 
“We have the technology platform in Ensogo Edge, the strategic relationships, and now the balance sheet to deliver on that opportunity,” Marszalek said in his statement.
 
Ensogo is eyeing the e-commerce potential in its core markets of Hong Kong, Singapore, Malaysia, Thailand, Indonesia and the Philippines, which collectively have a population of over 471 million.
 
In its presentation to investors, Ensogo said that the number of Internet users in the region is expected to grow from 168 million currently, to more than 300 million by 2019.
 
It also said that online transactions took up less than 1% of the total retail spend in South-East Asia in 2014, compared with the 10.5% rate in China.
 
With the new fundraising exercise, as well as the appreciation of its share price, it appears that investors are confident of Ensogo’s prospects.
 
This is a significant contrast to the situation it faced in the fourth quarter of last year. In November, Digital News Asia (DNA) reported that Ensogo – then still known as iBuy – was under pressure to cut monthly operating expenditure.
 
About a month later on Dec 22, 2014, the company announced a series of new top-level appointments, including group chief logistic officer Martin Dudek; regional head of marketing Liviu Nedef; country manager of Malaysia Jan Hansen; and country manager of Singapore Arne Koch.
 
During the same period, the company carried out significant layoffs across its markets.
 
Its share price had also hit as low as the A$0.07-0.08 level, versus the A$0.38 levels in July, 2014.
 
Winning the market perception battle was one task – next is the customer battlefront.
 
In its presentation to investors, Ensogo said its main focus for the first half of 2015 will be mainly on improving customer experience, while its focus for the second half will be on customer acquisition.
 
Such a move is timely because the company has been receiving bad reviews of its service this year.
 
In January this year, online news portal The Rakyat Post reported that Ensogo was “disappointing” customers, who had alleged that they had not received items they purchased via the e-commerce platform.
 
Related Stories:
 
China’s Vipshop takes 12.2% stake in Ensogo
 
Ensogo raises additional US$7.6mil from HK-based Ward Ferry
 
Ensogo lays off staff across the region
 
iBuy under pressure, board orders US$216K monthly opex cut
 
 
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