Wednesday, 3 June 2015

Singapore O&G Ltd - Balloting Results

Singapore O&G Ltd has proven to be 3 red chillies hot indeed. Applicants who applied for 100,000 shares have a 5/99 chance and will be allocated 7,000 shares. 


Mr. IPO has no luck this time. Both accounts drew a blank. Hope you will have better luck than him! ^_^

Saturday, 30 May 2015

Singapore O&G Ltd



Singapore O&G Ltd ("O&G" or the "Company") is offering 43.6m new shares at $0.25 each for an initial public offering on Catalist. There will be 41.4m for placement and 2.2m shares for the retail public. The IPO will close on 2 June 2015 at 12pm.The market cap based on 218m shares will be around $54.5m

Principal Activities

The Company comprises a group of specialist medical practitioners in women's healthcare and has an established track record in the Obstetrics and Gynaecology ("O&G") field. O&G particular focus is on pregnancy care and delivery, the female reproductive system, and gynaecological and breast cancer.


The Company has 8 clinics across 5 locations in Singapore


Simple Structure

The Company has a very simple structure. It is actually quite easy to understand. If i can "hazard a guess" each of them used to be operating independently. After all, each clinic is a revenue centre like itself.The 8 clinics then "swop 100% ownership of their respective companies" into the shares of the holding Company and proceed to list the holding Company O&G. O&G will be in a good position to acquire new clinics in Singapore and across the region. My guess is that it will move to an acquisition mode once its shares are trading at attractive valuation, the shares will then becomes a powerful "currency" for acquisition but the key is execution. They must be able to be "one-mind" and execute its plans well. 


If i can imagine a similar group listed on SGX, it will be like Q&M Dental. I have to say that Q&M Dental have executed very well and the share price have reflected as such but that is because they also have a tight agreement among the initial shareholders not to sell out their shares for many years. And this allows the founders to execute of the business strategy.


Financial Performance


The Company has been showing pretty stable revenue and profits and that increased quite nicely in FY14. The revenue was $13.5m and net profit came in at $5.8m. The net margin was a healthy 37.2%.


The Company intends to distribute up to 90% of its net profit as dividends for FY2015. That translate into 7.3% based on historical FY2014 earnings and could potentially be higher if the EPS continues to improve in FY2015. Based on the EPS of 1.95 cents, the company is listing at a valuation of 12.8x PE.

Use of Proceeds and Future Plans

  1. Expand our business operations locally and regionally through organic growth, joint ventures and acquisitions
  2. Investments in healthcare professionals and synergistic businesses to ensure that we are at the forefront of the industry 
  3. Diversify and grow our patient base to include more corporate clients and medical travellers
What i like about the Company

  • It is in the niche healthcare segment for women. I think healthcare is a good sector that still have an exciting macro story. 
  • While Singapore can be a mature market,  it will provide a strong base in which allows O&G to expand into the less penetrated regions
  • It has stable cash flow and medical practices is a very cash generative business
  • It's a debt free business. There is much headway to use leverage to finance future growth 

My Concerns


  • Humans are pretty mobile creatures so if they are unable to retain their talented specialists, the Company will be in trouble. Nothing is going to stop the specialists from cashing out and then restarting the business again sometime down the road
  • Why are they having such a high dividend payout? Shouldn't they be keeping more cash at the hold co for expansion? A lower payout of ~50% will be sufficiently attractive so that is is sustainable as well. It will have a nice balance between keeping enough cash to grow the business and rewarding shareholders
  • The ability to amalgamate the different clinics under one corporate identity SOG. Currently i would view it as separate clinics rather than O&G clinics. If the intent is to keep them separate, then the company would not be able to build up a brand and image.
Valuation


The listed peers in the healthcare sector group are currently trading at ridiculous valuations. Q&M Dental is trading in excess of 50x PER, Raffles Medical Group at more than 30x and Healthway Medical is a more reasonable valuation of 14x historically. Using the EPS of 1.95 cents and a PE multiple of 14-20x, the fair value of Singapore O&G should be between 28c and 39 cents. I understand the placement is pretty hot and have been taken up by the doctors' rich friends as such i couldn't get any placement.

Chillis

Given this is the first IPO with public tranche after a long hiatus, i have to give it some support lah! I will give it a 3 Chillis for reasons mentioned above. Hooooooot ah....


Saturday, 25 April 2015

GCCP Resources Limited



GCCP Resources Limited ("GCCP" or the "Company") is placing out 122m shares at $0.23 each. GCCP is principally engaged in the quarrying and processing of limestone and according to the prospectus, the Company has one of the biggest GCC-grade calcium carbonate reserves in Malaysia. The IPO will close on 28 April at 12pm and starts trading on 30 April 9am. The market cap is $274.5m.

Quarries


The Company has two quarries of approximately ~26.3m tonnes of calcium carbonate reserves and according to the prospectus, the value of the quarries is in the range of between US$170m - US$580m.... with a preferred value of US$310m (seriously?)

What is Calcium Carbonate used for?


In case you are wondering, there are many uses for calcium carbonate, including my secondary school days lab experiment of blowing carbon dioxide into a calcium carbonate solution to turn it chalky. 


The consumption is expected to increase by between 3.5% to 4.1% per annum and the price outlook remained positive for the near term.

 
Financial Performance

Nothing to shout about as the Company continues to be loss-making and not operationally ready. I am not privy to 2015 forecasts.

What i like about the Company
  • Accounts is audited by a big 4, Ernst & Young.
  • Market cap is below the appraised value of the quarries.
  • Alan Wang is one of the pre-placement investors ~1.1% but his effective cost is only 11.2 cents versus public tranche of 23c! I would view it more positively if he is in at the IPO price.
My Concerns
  • Loss making company to the tune of MYR10.7m for 9M2014. Company is not operationally ready yet
  • Environmental unfriendly but essential resources play
  • Investors here are lukewarm to resources play looking at how CNMC goldmine traded
  • Not sure how true the appraised values are as i am not an expert in this
Mr IPO ratings

Since there is no public tranche and the company is not even operationally ready, i will give it a zero chilli rating. Buy only if you really like the "chalky lime water" experiment during your secondary school days or buy when the cloudy outlook of this Company turns clearer! 

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