Friday, 27 July 2007

Dutech Holdings Limited


(IPO booth in Raffles Place on a rainy day)

Dutech Holdings business can be divided into 2 main segments:
(1) Design and manufacture of high security UL certified ATM and commercial safes;
(2) Deisgn and manufacture of high quality and reliable semiconductor instruments and parts and precision machining parts for semiconductor equipment. The prospectus is here.

Public offer: 3m shares at 33 cents each
Placement offer: 82m shares
Manager: OCBC Bank
Closing date: 31 July 2007

While the profit growth has been very impressive, that is quite misleading as it started from a very low base in FY2004. The net margin for FY2006 is around 25% and that is fairly decent in my opinion. The order book as of May 2007 is RMB 145.8 million. EPS for FY2006 using post-IPO no. of shares is around 2.918 singapore cents. Assuming a 100% growth in revenue for 2007 and a net margin of 25%, the sales for 2007 will be around RMB 376m and net profit will be around RMB 94m. The FY2007F EPS for 2007 will be around 5.74 Singapore cents.

Using a fair value matrix of 8x-12x (lowered after the bloodbath today), the implied fair value range will be 46cents to 69 cents. As usual, the public offer offers a low probability to investors due to its small size available for subscription.

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