Keong Hong Holdings Limited ("KHH" or "the Company") is offering 27m New Shares at S$0.24 each for a listing on Catalist. The Company is a provider of a broad range of building construction services. As of 30 Sep 2011, the order book was S$541m.
The timing couldn't been "better". Right smack in between the new property measures (additional stamp duties) and the European crisis.
The revenue grew from $78m in FY2008 to $125m in FY2010. Net profit grew from $1.4m to $8.1m and net margin improved from 1.9% to 6.5% during the same period.
There are no public tranche in this IPO. The NTA after considering the new shares issues is $0.2094. The fully diluted EPS based on the enlarged share cap and assuming the service agreements were in place is Singapore 4.94 cents and that translate into a historical listing PER of around 4.85x. Based on the IPO issue price, the market cap is around S$38.4m.
This is the second 'construction' related company to list in recent weeks after TA Corporation. As company is not issuing shares for the general public, i will not attempt to determine its fair value. However, looking at the historical listing PER, the Company is definitely fairly valued. Any upside will be considered a bonus.
Tuesday, 13 December 2011
Saturday, 19 November 2011
TA Corporation
For records only
TA Corporation ("TA" or "the Company") is an established property and construction company in Singapore. It is offering 122m shares (113m new and 9m vendor) at a price of $0.28 each. The no. of shares for public amounted to only 2m, which is not unexpected given the current market conditions. The IPO closed on 17 Nov 2011.
At the date of the prospectus, the order book was approximately $316m. Revenue hit $235.5m and net profit to shareholders was $30.1m in FY2010. Adjusted EPS for FY2010 based on the enlarged share cap was Singapore 6.5 cents. The listing PER is about 4.3x. The NAV per share post listing was 30.1 cents, higher than the IPO price of $0.28. The market cap is $130.2m based on the IPO price. First half results showed a revenue of $45.5m and a net profit of $5.8m (to shareholders). Adjusted EPS for first half is 1.2 Singapore cents. As illustrated, the results can be very lumpy in nature, indicating how cyclical the industry can be.
Let's take a look at its listed peers here:
Lian Beng is currently trading at historical PER of 3.4x and an EPS of 9.1 Singapore cents for year ended 31 May 2011.
Chip Eng Seng is trading at historical PER of 2.4x and an EPS of 16.6 Singapore cents for year ended 31 Dec 2010.
Yongnam is trading at historical PER of 6.0x and an EPS of 4.1 Singapore cents for year ended 31 Dec 2010.
In terms of valuation, TA Corporation is valued at a higher valuation than Lian Beng and Chip Eng Seng but lower than Yongnam. The current "IPO" bull run may provide some upside in the opening hours but don't expect the euphoria to last for too long. The "bigger" float of 122m shares means that there will be active sellers should the price run too far ahead of its rivals and traders might as well switch from TA to other construction companies.
TA Corporation ("TA" or "the Company") is an established property and construction company in Singapore. It is offering 122m shares (113m new and 9m vendor) at a price of $0.28 each. The no. of shares for public amounted to only 2m, which is not unexpected given the current market conditions. The IPO closed on 17 Nov 2011.
At the date of the prospectus, the order book was approximately $316m. Revenue hit $235.5m and net profit to shareholders was $30.1m in FY2010. Adjusted EPS for FY2010 based on the enlarged share cap was Singapore 6.5 cents. The listing PER is about 4.3x. The NAV per share post listing was 30.1 cents, higher than the IPO price of $0.28. The market cap is $130.2m based on the IPO price. First half results showed a revenue of $45.5m and a net profit of $5.8m (to shareholders). Adjusted EPS for first half is 1.2 Singapore cents. As illustrated, the results can be very lumpy in nature, indicating how cyclical the industry can be.
Let's take a look at its listed peers here:
Lian Beng is currently trading at historical PER of 3.4x and an EPS of 9.1 Singapore cents for year ended 31 May 2011.
Chip Eng Seng is trading at historical PER of 2.4x and an EPS of 16.6 Singapore cents for year ended 31 Dec 2010.
Yongnam is trading at historical PER of 6.0x and an EPS of 4.1 Singapore cents for year ended 31 Dec 2010.
In terms of valuation, TA Corporation is valued at a higher valuation than Lian Beng and Chip Eng Seng but lower than Yongnam. The current "IPO" bull run may provide some upside in the opening hours but don't expect the euphoria to last for too long. The "bigger" float of 122m shares means that there will be active sellers should the price run too far ahead of its rivals and traders might as well switch from TA to other construction companies.
JK Tech Holdings Limited
For records purpose only
JK Tech Holdings Limited ("JK Tech" or "the Company") placed out 10m new shares at $0.20 each for a listing on Catalist. The offer closed on 10 Nov 2011.
The Company is a one stop provider of IT products, services and solutions to companies. It reported a revenue of $19.8m for FY2011 with a net profit of $2.7m. The EPS based on the enlarged post IPO share cap was 4.08 Singapore cents. That translate into a listing PER of 4.9x. The market cap post listing is only $13.27m, ultra small cap company.
Just a note of caution: For ultra small cap company like JK Tech or Libra, the free float is actually very small. Imagine the number of shares for free float is 66.4m x 30% = 19.9m shares. At 20 cents, the free float translate into $3.98m value. In other words, the founders just need to find 10 friends to take about $400k each to absorb the free float and push up the price thereafter. That is why you see wild swings in prices of such stocks if they are being targeted by speculators. The name of the game is 'dont be the last one holding the baby'.
JK Tech Holdings Limited ("JK Tech" or "the Company") placed out 10m new shares at $0.20 each for a listing on Catalist. The offer closed on 10 Nov 2011.
The Company is a one stop provider of IT products, services and solutions to companies. It reported a revenue of $19.8m for FY2011 with a net profit of $2.7m. The EPS based on the enlarged post IPO share cap was 4.08 Singapore cents. That translate into a listing PER of 4.9x. The market cap post listing is only $13.27m, ultra small cap company.
Just a note of caution: For ultra small cap company like JK Tech or Libra, the free float is actually very small. Imagine the number of shares for free float is 66.4m x 30% = 19.9m shares. At 20 cents, the free float translate into $3.98m value. In other words, the founders just need to find 10 friends to take about $400k each to absorb the free float and push up the price thereafter. That is why you see wild swings in prices of such stocks if they are being targeted by speculators. The name of the game is 'dont be the last one holding the baby'.
Monday, 7 November 2011
Libra Group Limited
Libra Group Limited ("Libra" or "the Company") is in the air-conditioning and mechanical ventilation business. The Company is placing out 31m Placement Shares (26m New and 5m Vendor) at $0.205 each. The IPO will close on 10 Nov 2011 at 12pm. The market cap of this company is $20.44m.
The Company's revenue was $6.3m in FY2008 and grew to $29.8m in FY2010. Profit grew from $0.8m to $3.7m during the same period. Based on the adjusted EPS of 3.71 cents for FY2010, the Company is listing at a historical PER of 5.5x. The first half performance is not very encouraging with revenue dropping from $17.7m to $11.7m for the same period last year and profit before tax dropping from $2.65m to $1.162m. Looking at the current trend, it seemed the FY2011 will not be as good as FY2010. As such, the company could possibly be listing at a high single digit forward PE.
One pre-IPO investor came in at around $0.15 per share and subject her "profit-portion" number of shares to be locked up for a year. (sounds like an equitable way).
This is an ultra small cap company and is 'by invitation' only. In this regard, no analysis is done on the 'fair value' of this company and personally, this industry and sector is not my cup of tea and I leave it to investors who knows how to 'appreciate' it better.
Monday, 31 October 2011
Parkson Retail Asia Limited
Parkson Retail Asia Limited ("PRA" or "the Company") is offering 147m shares at S$0.94 subject to further over-allotment option. Parkson was established in 1987 and today, operates about 50 stores across cities in Malaysia, Vietnam and Indonesia. The Company is scheduled to open 3 malls in FY2012 with one store each in Malaysia, Vietnam and Indonesia. The first "foreign" department store in Cambodia is expected to open in FY2013. The Company operates under the name Parkson in Malaysia and Vietnam and under the name "Centro" in Indonesia. The Indonesia malls were newly acquired in June 2011. In a nutshell, the Company operates departmental stores in South East Asia and is similar to companies such as Metro, Tangs, Isetan, Takashimaya etc.
Proforma sales has been growing steadily from S$301m from 30 Jun 2009 to S$408m in 30 Jun 2011 and net profit has also grown from S$11m in FY2009 to $35m in FY2011. PRA is offering 136.15m shares via placement and the remaining of 10.85m shares via public offering. The offer will end on 1 Nov 2011 at 12pm. The Company intends to use the majority of the proceeds raised for stores opening. The Company intends to distribute dividends between 40% to 50% of its distributable profits from next FY onwards.
According to the Prospectus, the proforma EPS for the year ending 30 June 2011 adjusted for the IPO shares will be 5.17 Singapore cents. At the IPO price of $0.94, it translates into a listing PER of 18.18x. The NAV post IPO will be $0.29 (versus the $0.94 subscription price). Based on a DBS research report dated 28 Oct on Parkson Holdings Berhad ("PHB"), the IPO price Parkson Retail Asia at 13x of forecasted earnings of FY12PE of S$48m. The market cap at IPO price is $699.64m.
Basically this is a retail sector play in the South East Asia (ex Singapore). It is good that SGX can attract a Malaysian home brand to list in Singapore. What would be some of the risks investors should be aware of?
1. Foreign Currencies risk. Basically the underlying assets are in Malaysia, Indonesia and Vietnam. The "sales and profits" will be made in those underlying currencies and then translated to Singapore dollars for reporting purposes. If SGD strengthens against currencies in those countries, then it will have an adverse impact on the profitability. From the cash flow statement, the forex impact on cash was a whopping negative $10.13m
2. Exchange Control. In addition to forex risks mentioned above, the repatriation of profits may be subjected to exchange controls in Malaysia and Vietnam. However, this may not be a significant risk factor as PRA will want to dividend out its earnings to its parent PHB.
It is interesting to note that while sales has been increasing over the last 3 years, the net cash generated from operating activities has actually been declining from $83m to $55m. The net cash used in Financing activities has also surged to $70m in FY2011 (mainly due to dividends of $56.3m back to its parent company..)
This deal somewhat reminds it of Capitaland spinning out Capitamall Asia. Parkson Holdings Berhad is already listed in Malaysia. It then restructure itself and groups all the SEA department stores under a new Singapore holding company, including the recently acquired Centro stores in Indonesia. It then list the new Singapore holding company called Parkson Retail Asia Limited. (For your info, the parent company of Parkson Holdings Berhad is Lion Diversified Holdings Berhad). After the IPO, Parkson Holdings Berhad will still own about 67.6% of the Company. PHB also holds about 51.5% of Parkson Retail Group listed on HKSE.
In terms of Valuation, the IPO is fairly priced for historical and somewhat more attractively priced for FY2012. As of 1 Nov, Parkson Holdings Berhad is trading at 17.7x historical and 14.4x forward while Parkson Retail Group is trading at 19.8x historical and 16.4x forward. If the IPO rise to 15x forward, it will imply a price of $1.08 (15% upside from IPO price). Post IPO, there will be 744.3m shares. Assuming DBS's $48m earnings forecast is accurate and they pay out 40-50%, that will mean $19.2-24m of dividends or around 2.58-3.22 Singapore cents per share. The implied yield will be 2.74-3.42%. While there are no 'similar peers' listed here, OSIM is currently trading at 11.1x forward and Metro Holdings at single digit PE. I guess it can 'command' a premium due to its strong parentage and underwriters willing to price the IPO at a premium despite current market sentiments.
Conclusion: This investment provides a good exposure to investors who are keen on the SEA department stores. I do like the outlook, proven track record and rising consumer income in Vietnam, Indonesia, Malaysia and possibly Cambodia going forward. While the pricing may not be cheap, it is priced close to its parent company and cheaper than its HK listed related company (reasonably so). The promised yield will provide some downside support while keeping enough cash for its future expansion.
Proforma sales has been growing steadily from S$301m from 30 Jun 2009 to S$408m in 30 Jun 2011 and net profit has also grown from S$11m in FY2009 to $35m in FY2011. PRA is offering 136.15m shares via placement and the remaining of 10.85m shares via public offering. The offer will end on 1 Nov 2011 at 12pm. The Company intends to use the majority of the proceeds raised for stores opening. The Company intends to distribute dividends between 40% to 50% of its distributable profits from next FY onwards.
According to the Prospectus, the proforma EPS for the year ending 30 June 2011 adjusted for the IPO shares will be 5.17 Singapore cents. At the IPO price of $0.94, it translates into a listing PER of 18.18x. The NAV post IPO will be $0.29 (versus the $0.94 subscription price). Based on a DBS research report dated 28 Oct on Parkson Holdings Berhad ("PHB"), the IPO price Parkson Retail Asia at 13x of forecasted earnings of FY12PE of S$48m. The market cap at IPO price is $699.64m.
Basically this is a retail sector play in the South East Asia (ex Singapore). It is good that SGX can attract a Malaysian home brand to list in Singapore. What would be some of the risks investors should be aware of?
1. Foreign Currencies risk. Basically the underlying assets are in Malaysia, Indonesia and Vietnam. The "sales and profits" will be made in those underlying currencies and then translated to Singapore dollars for reporting purposes. If SGD strengthens against currencies in those countries, then it will have an adverse impact on the profitability. From the cash flow statement, the forex impact on cash was a whopping negative $10.13m
2. Exchange Control. In addition to forex risks mentioned above, the repatriation of profits may be subjected to exchange controls in Malaysia and Vietnam. However, this may not be a significant risk factor as PRA will want to dividend out its earnings to its parent PHB.
It is interesting to note that while sales has been increasing over the last 3 years, the net cash generated from operating activities has actually been declining from $83m to $55m. The net cash used in Financing activities has also surged to $70m in FY2011 (mainly due to dividends of $56.3m back to its parent company..)
This deal somewhat reminds it of Capitaland spinning out Capitamall Asia. Parkson Holdings Berhad is already listed in Malaysia. It then restructure itself and groups all the SEA department stores under a new Singapore holding company, including the recently acquired Centro stores in Indonesia. It then list the new Singapore holding company called Parkson Retail Asia Limited. (For your info, the parent company of Parkson Holdings Berhad is Lion Diversified Holdings Berhad). After the IPO, Parkson Holdings Berhad will still own about 67.6% of the Company. PHB also holds about 51.5% of Parkson Retail Group listed on HKSE.
In terms of Valuation, the IPO is fairly priced for historical and somewhat more attractively priced for FY2012. As of 1 Nov, Parkson Holdings Berhad is trading at 17.7x historical and 14.4x forward while Parkson Retail Group is trading at 19.8x historical and 16.4x forward. If the IPO rise to 15x forward, it will imply a price of $1.08 (15% upside from IPO price). Post IPO, there will be 744.3m shares. Assuming DBS's $48m earnings forecast is accurate and they pay out 40-50%, that will mean $19.2-24m of dividends or around 2.58-3.22 Singapore cents per share. The implied yield will be 2.74-3.42%. While there are no 'similar peers' listed here, OSIM is currently trading at 11.1x forward and Metro Holdings at single digit PE. I guess it can 'command' a premium due to its strong parentage and underwriters willing to price the IPO at a premium despite current market sentiments.
Conclusion: This investment provides a good exposure to investors who are keen on the SEA department stores. I do like the outlook, proven track record and rising consumer income in Vietnam, Indonesia, Malaysia and possibly Cambodia going forward. While the pricing may not be cheap, it is priced close to its parent company and cheaper than its HK listed related company (reasonably so). The promised yield will provide some downside support while keeping enough cash for its future expansion.
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