Sunday, 29 July 2007

Fujian Zhenyun Plastics Industry


(IPO booth at Raffles Place - Relatively smaller when the booth of Ascendas India REIT is opposite)

Fujian Zhenyun Plastic Industry Co., Ltd is principally engaged in the R&D, design, manufacture and sale of a broad range of plastic pipes and fittings. The prospectis is here.

Public offer: 1.75m shares at 62 cents
Placement offer: 33.25m shares
Closing date: 1 Aug 2007
Manager: Genesis Capital



Sales for 2006 is RMB 393m and net profit is RMB 63m and EPS (based on post-IPO 115m shares) is RMB 0.55 or Singapore 11 cents. The Company has been growing by 30% annually for the last 3 years and assuming this will continue in 2007, the sales for 2007F will be RMB 511m and net profit will be RMB 81.76m and EPS will be 14.2 Singapore cents. Based on the IPO price of 62 cents, it is priced at a forward PE of 4.37x. Sinopipe, the listed peer on SGX, is trading at a PE of around 6x. Assuming a same valuation matrix for Fujian Zhenyun, the fair value will be around 85 cents.

Personally i dont like this investment. I cant see what so exciting about a piping company with low entry barriers. There are better companies around for longer-term investment, this is another sell on first day investment for me.

5 comments:

Anonymous said...

Come visit singaporereits.blogspot.com

clownz said...

Why do u not like this one? Very Low PE, with respectable earnings, NTA and cashflow. Seems to be fine..

Hope to learn from you. =) Thanks!

2Y Capital said...

Hi Clownz,

The main reason for not liking this company is that i view the products of the company as having a 'single product' with low entry barriers.(I may be wrong in my understanding and assessment of course).

clownz said...

i see.. but what do u think about sino then? A similar company in the market shd benefit from the listing of a peer and bring its price up to fujian's?

2Y Capital said...

Clownz, theoretically it could be practically may not because each company is different and it will also depend on whether they are the respective market leaders in their fields. The market leaders will always enjoy a premium over its peers.

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