China Hongcheng Holdings Limited

(One of the better decorated IPO booth in Raffles Place)

China Hongcheng Holdings Limited manufactures home textiles. The Company produces cotton yarn and fabric, silk cotton fabric, yarn dyed cotton fabric, high density broad width cotton fabric. The Company also manufactures bed linens for itself and under contract for other companies. The prosectus is here.

Public offer: 3 million shares at 50 cents each

Placement offer: 65 million shares

Closing Date: 6 August 2007

Manager: CIMB

This company is somewhat of a combination of "Friven" + "Foreland Fabritech" + "China Printing & Dyeing". While it has its own manufacturing facilities for farbic, it also produces high end bed linen for local and overseas markets. Sales for 2006 was RMB 430.6m and net profit was RMB 54.9m. Based on post IPO shares of 268m shares, the EPS for FY2006 is around 4.1 Singapore cents. For the 9 months ended 31 March 2007, the revenue was RMB 395.6m and net profit was RMB 64.193m. Basically it showed that company is on track to meet the 2007FY forecast and i project a net profit of around RMB 85m for the year ended 30 June 2007. The EPS for 2007F will be around 6.4 Singapore cents. Assume it grow by another 30% in FY2008, the EPS will be Singapore 8.32 cents.

Foreland is trading at a PE multiple of 14.5x while China Print is only trading at around 7.3x. Assume a forward PE mulitple range from 8x-11x, the fair value range of China Hongcheng is between 66 cents to 92 cents. Happy investing.

Sentiments & IPO

Sentiments in the market place plays a very important role in deciding the number of IPOs being launched. You always see a lot of IPOs when the sentiments is bullish and relatively fewer IPOs being launched when sentiments is weak or bearish.

July 2007 must be one of the 'busiest' month this year for IPO managers and underwriters. It seemed to me that all the companies are rushing to launch its IPO this month as the market was relatively hot (if we exclude the bloodshed last week on 26 and 27 July). At last count, there are 14 IPOs that are launched in this month of July alone verus only 3 IPOs in March 2007 when sentiments was very weak.

Why do sentiments play such an important role in the IPO market? Some of the reasons are as follows:

(1) It is easier for the Company to sell shares in bullish sentiments.

During bullish sentiments, it is much easier for the Company to attract investors. Some less discerning' and short term 'investors' will not care whether the fundamentals of the Company is good or not as long as they know that they can make a quick buck by fliping the shares. These 'investors' will buy the shares purely based on sentiments and many "not-so-sound" companies with no real substance will want to launch their IPO during this period

(2) Company can sell its shares at a higher valuation.

When sentiments are bullish, Companies going for listing will usually be able to list 'at the higher end' of the valuation range (thus receiving more money from selling their shares). Remember how Chemoil 'delayed' its IPO because the owner wasn't happy with the IPO valuation it received?

(3) Company can command a higher market cap post IPO

During bullish sentiments, the share price after listing will usually be much higher than its IPO price, thus creating good sentiment and goodwill among the investors. This willl in return, help to boost the market cap of the company as its share price goes up post IPO. Company with a bigger market cap finds it easier to attract talents as well as fund managers to invest in it. In addition, it is much easier for the Company to do mergers and acquisitions if it has a high market cap.

(4) Managers and Underwriter take less risk.

Manager and underwriters take less risk when sentiments are bullish as all the shares will usually be subscribed and they can earn their fees with little risk of the shares being under subscribed by the market. Thus you can see Managers rushing to launch the IPOs during good times. The Managers and Underwriters want to have the cake and eat it.

Since market sentiments has turned quite 'bearish' over the last 2 trading days, i wonder if there are any chance for the remaining IPOs in July- Yongxin, Dutech and Fujian Zhenyun to go 'underwater' i.e. below its IPO price. What do you think?

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.

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.

Ascendas India Trust

(IPO booth at Raffles Place with Indian flavour)

a-itrust is Singapore's first listed indian property trust and this issue is priced at the top end of its indicative range due to strong demand from institutions. The offering price is $1.18 per unit. The prospectus is here.

Offering size: 423,377,249 units (will increase to 465,714,974 units if over-allotment exercised)
Public offer: 31,281,000 units
IPO Price: S$1.18 per unit
Yield at IPO price: 4.75% (FY 31 March 2008) & 5.81% (FY 31 March 2009)
Closing date: 30 July 2007, 7am.
Distribution is made semi-annually
Financial Adviser: JP Morgan


Together with China, India is one of the twin growth engines of Asia and this trust allows you to participate in the unique growth opportunity in India. The dividend yield is projected to increase from 4.75% to 5.81%. This REIT allows investors to have exposure in India with good potential for capital gains and a stable income. If you currently holding "Singapore based only" Reit, you may want to switch part of your portfolio into this Indian REITs for portfolio and geographical risk diversification. Assuming an yield compression to 4% based on FY08 and FY09, the fair value range will be between $1.40 to $1.72.

Just a note that if you have received the units from the placement tranche, you can still make ONE application for the public offer. See Appendix F-2 Note (5) in the prospectus. Happy investing. Vested.

Fair Value

Fair value - have you ever wondered what is fair value and what is not? When someone says the fair value of ABC company is 50 cents, what exactly does it mean? Is it true that as long as someone is willing to pay a price for it at arms length, that value is a fair one? (this topic can go on and on for days without a conclusion). hahaha

I managed to get 3 lots of Avi-Tech from the public tranche (it has been a long time!) and i exited early this morning but somehow the share price of AVI just keep going up and up and closed at 75.5 cents versus the IPO price of 33 cents. It somewhat proved to me that my "fair value" for Avi-Tech is 'wrong'. Perhaps i should be less biased against tech companies and should be more aggressive in my valuation matrix and should be more convinced about the placement capability of Westcomb as well.. :P

Based on the current bullish sentiments, should i then revise my valuation matrix for tech companies to 15-20x instead of the 8-10x? If i have used a more 'bullish' valuation matrix, the fair value range for Avi-Tech and MAP Technology will be between 64 cents to 86 cents.

However, what may be a "fair value" today may not be the "fair value" 6 months down the road and it is affected by many different factors. As such, do take note that the fair value presented in my blog is based on the information i derive from the prospectus, the assumptions i made regarding growth of the Company and this fair value can vary greatly as time progress when new facts are presented regarding the growth and execution capability of the management. The visibility of the Company will also be clearer as time progressed.

Happy investing.

Reyphon Agriceutical Limited

(IPO booth at Raffles Place on a rainy day)

Reyphon Agriceutical Limited is a manufacturer of agriceutical products and its principal products are gibberellic acids and plant antibiotic. The prospectus is here.

Public offer: 2m shares at 39 cents
Placement offer: 76.6m shares
Closing date: 30 July 2007
Manager: Philip Capital



This is an interesting company amidst the hoo-har about food safety in China. China passes its first draft on Food Safety today. The tighter regulation for food safety will actually mean good news to ISO-certified agriceutical companies like Reyphon and i believed Reyphon is 'first-of-its-kind' listing on SGX. I cannot recall a similar companies in this field. The listing of this company also means a windfall for Sinomen as it holds 52% of Reyphon post-IPO.

The growth of this Company has been very impressive and it is likely that this growth can be sustained with the increased in production facilities post its listing. EPS for 2006 based on post ipo share of 313.8m shares is Singapore 2.694 cents. Assuming its profit grow by another 50% in 2007, the EPS will be 4.041 cents. Based on valuation matrix of 15-20x PE, the fair value price will range between 61 cents and 81 cents, a significant upside from IPO price and under current sentiments, it will even exceed my 81 cents fair value if investors priced towards 2008 estimates.

Just hoot it although i must say that it will be extremely tough to get it (what'z new ah?)

Yong Xin International Holdings Ltd

(Yong Xin IPO booth at Raffles Place)

Yong Xin International Holdings Ltd manufactures high precision steel strips and its main products are chrome plated steel strips and cold rolled steel strips. The prospectus is here.

Public offer : 2m shares at 30 cents

Placement offer: 58m shares at 30 cents

Manager: Sterling Coleman

Closing date: 26 July 2007

This is another good quality IPO from Sterling Coleman. It seemed that this boutique IPO firm is on the right track and hitting the market with a series of quality Chinese IPO companies. Unfortunately the number of shares available for the public tranche is really pathetic and the probability of getting it from the ATM is extremely low. The listed peers in Singapore are mainly Link Hi Holdings and Cosmo Steel Holdings. Currently steel products are in high demand in China since China is the factory of the world and this is no exception.

(peer comparison)

Based on a 15x forward PE for 2007 EPS, my fair value for this company is 60 cents. (vested).

How to increase your probability of get IPO shares from the public tranche

Let's do an interesting topic today on how to increase your chances of getting some shares from the IPO public tranche.

It is always relatively easier to get IPO shares when sentiments are weak and very diffcult to get IPO shares when sentiments are hot and that is what is happening right now! The proportion of shares allocated to the public tranche are so pathetic that it is almost always certain that you will waste your $2 application fees. Dont you get frustrated when you know you have wasted that $2 again at the ATM applying for IPO shares? So what are some of the tips to increase your chances of getting the IPO from the public tranche? (we will talk about how to lay your hands on the placement tranche another day).

(The above is the allocation table for Wanxiang IPO)

According to the listing manual chapter 2, the Company going for listing must have at least 1,000 public shareholders for a Mainboard listing and at least 500 public shareholders for a SESDAQ listing. The listing company will try to meet the minumum number of sharesholders from its placement tranche, as such the public tranche is more for 'show' as well as to truly ensure that the shareholders are truly independent and 'not-related' to the Company. These are the following things which you can do to increase your chances for the public tranche:


No.1 - Apply for at least 50,000 shares but the optimal will be 100,000 shares.


From the IPO allocation table above, you can see that more than 70% of the public tranche are allocated to this group of IPO applicants and that this group has the highest probability of getting the shares versus the rest. In addition, you will usually get a 'decent' allocation of about 3k-8k shares, which makes it more 'worthwhile' than those who get 1k or 2k shares.


No.2 - Use as many different CDP accounts as you can to apply for the shares.


Another way will be to gain access to the CDP/ATM accounts of family and relatives who don't buy the IPO shares and use their accounts to apply for the shares. By using 4 to 5 accounts to apply for the IPO shares, you definitely stand a better chance of getting the IPO allotment. Do note that it is an offence to make multiple applications for IPO shares using the same CDP account, so dont ever do it.


No.3 - Borrow $ for a few days to increase your chances.


If the IPO is really hot, you may consider getting interest free loans from family or relatives to increase your chances of getting the IPO shares just for a few days. Many years ago, our local banks provides "IPO Financing" to help increase your chances but this scheme has since been scrapped. You will have to use your 'overdraft' facilities if you do not have access to 'interest-free' loans.



No.4 - Apply for the shares on the closing date and as close to the closing time as possible (not scientifically proven).


There is a hearsay that if you apply on the IPO closing day and as close to the IPO closing time (usually 12pm), your chances of getting the shares will be higher. This is however, not scientifically proven but it may hold some ground on the basis that if you apply the shares on the last day, you only 'lose' interest income for 2 days before the money is returned to you. In addition, you never know if the IPO allocation programme logic is indeed flawed and favour those who applied on the closing day. Why not you try this method and let me know if your chances has improved but the risk is that you might forget to apply for the IPO or miss the 12pm deadline.

No.5 - Never give up.

Sometimes we give up after a few times but you never know when your lucky stars will shine again. My motto is 'never give up' and you might just be rewarded for your persistance and perserverance.

Good Luck and you may just get it on your next try.

(If you find this lesson useful, do drop me your comments so that i know what to focus on in my next lesson).

MAP Technology Holdings

MAP Technology Holdings Limited manufactures data storage products. The Company manufactures and sells stamping products, die cut components and provides electronics manufacturing services such as assembly, testing, procurement and logistics. The prospectus is here.

Public Offer: 3 million shares at 32 cents
Placement Offer: 73.5 million shares
Manager: DBS

This is another IPO that doesnt excite me since it is in the technology sector although the Company showed very impressive growth for the last 3 years. The entire technology sectors in Singapore suffers from low PE multiples but you can expect a stable business as its parent company Min Aik Technology Co., Ltd is listed in Taiwan and Jurong Technologies (listed in Singapore) is an associated company of Min Aik.

Net profit for 2006 was US$5.8 million and assume it grow by 50%, net profit for 2007 will be US$8.7 million. EPS for 2007 will be around 8.7m (2007 profit) x 1.52 (forex) divide by 305.8 m shares x 100 = 4.3 singapore cents. Based on PE valuation of 8x-10x, the fair value of MAP will range between 34 cents to 43 cents.

I would rate this a Stag under current sentiments with some upside going forward if the Company can continue to show strong growth but i wont be investing this for the long term. It will rate this IPO as another sell on first day company for me. (vested)

Avi-Tech Electronics Limited

Avi-Tech Electronics Limited provides services and products to the semi-conductor industry. The Company designs burn-in boards and related products. Avi-Tech also offers engineering services and equipment distribution. The prospectus is here.

Public offer : 3m shares at 33 cents

Placement offer: 85m shares

Manager: Westcomb

This IPO is not one that 'excites' me a lot. One reason is that it is in the not-so-hot electronics sector and in the semi-conductor industry. If technology sector in Singapore is so 'hot', then you will not see M&A deals like acquisition of UTAC or Broadway or MMI, etc. Having said that, the Company seemed to be experiencing very strong growth with 1H07 sales growing by 117% over 1H06 and 1H07 profit is 67% over 1H06.

Assuming the net profit for 2007 is 1H07 x 2 = $15.2m, the EPS is 4.3 cents. At IPO price of 33 cents, it is priced at forward PE of 7.7x. Using a 8-10x forward PE, the fair value is approximately between 35-43 cents. I certainly hope this will not be the first IPO to go below water or everyone will lose confidence in Westcomb. It is a small stag for me and you will not be faulted for giving it a miss and save that $2 for a chicken rice since it is difficult to get from the public offer anyway.

Wanxiang International Ltd

Wanxiang International Ltd manufactures flavours and fragrances. The Company's products are sold to wholesalers and dealers; as raw materials in other fragrances and as raw materials in consumer goods. The prospectus is here.

Public offer: 4.6m shares at 29 cents each

Placement offer: 87.4m shares

Manager: Mitsubishi UFJ Securities (Singapore) Limited

This is the 'first of its kind' on SGX for flavours and fragrances, in this regard, you will not find any comparables here. Interestingly, the Company said that it has 6 major competitors for its major products and 3 comes from India!

Revenue for 2006 is RMB 313m and net profit after tax is RMB 44.2m. Based on post-IPO shares of 334.8m, the EPS is RMB 13.22 cents (or 2.65 Singapore cents). Assuming a decent 20% growth rate in top and bottom line for the next 2 years, the EPS for 2007 will be around 3.18 Singapore cents and for 2008, the EPS will be around 3.8 Singapore cents . Since this is the first of its kind here, i will give it some premium in valuation and based on a 10-15x PE multiple, the fair value for range between 32 cents and 47 cents based on 2007 figures and between 38 cents and 57 cents based on 2008 earnings projections.

Don't miss it but it will be super difficult to get this from the ATM. (whats new?!) :)

China Sports International Limited

IPO booth at Raffles Place

China Sports International Limited designs, manufactures, and sells branded sports fashion, footwear and apparel products. The prospectus is here.

Public offer: 3 million shares at 80 cents

Placement offer: 97 million shares at 80 cents.

Manager: Sterling Coleman

This is the blockbuster IPO for July as it is in the very hot sector of "Consumers China" and the stellar performance of China Hong Xing post IPO is another key reason why this Company will do well. Its closest peer listed on SGX, China Hongxing is trading at a phenomenal historical '06 PER of 49x and a forward '07 PER of 34x. While a not-so-related peer, Hong Guo is also trading at 25x '06 PER and 20x '07 PER. I have excluded Li Ning that is listed in Hong Kong as it is trading in the PEs in excess of 50s.

Based on listed peers valuation, my fair value for China Sports is at least $1.70

Dont miss this!

CMZ Holdings Ltd

CMZ Holdings Ltd produces and sells metal, resin and nylon zippers directly to manufacturers in the mid-high end market of the garment industry. The prospectus is here.

Public Offer: 1.8m shares (very difficult to get from balloting).

Placement Offer: 74.363m

Manager: Omega Capital Limited

Under the current IPO sentiments, it seemed that many companies are rushing out to be listed and this seemingly 'one product' company is no exception (hmm China's YKK ?). The Company managed to leverage on the boom in the garment industry in China to record impressive growth from FY2004 to FY2006. Sales for 2006 is RMB 159.3m (S$ 31.8m) and net profit of 38m (S$7.6m). EPS for 2006 based on enlarged share capital of 304.6m shares is RMB 12.5 (2.5 Singapore Cents). Based on IPO price of 23 cents, it is priced at an historical PE of 9.2x. Assuming EPS grow by 50% for 2007, the 2007F EPS is 3.75 Singapore Cents and based on its listed peers valuation of 10x-15x PE, the fair value for CMZ is in the range of 37 cents to 56 cents.

Good luck if you managed to get this IPO from the ATM! I wasted by my $2 again :(

Financial One

Financial One Corporation provides a variety of services to small and medium enterprises and its business include leasing, factoring and lending. The prospectus is here. I didnt too much analysis on this stock so it will not be fair for me to commend on this company. It was priced at the lower end of its indicative range. I didnt apply for the shares for the following reasons:

(1) The float is huge. 225m shares and subject to over allotment.
(2) 70% of its income is derived from Taiwan and as it is the pre-dominant player with 40% market share there, thus upside growth in Taiwan may be limited.
(3) Personally i felt that it should have listed on Taiwan Stock Exchange to command a better valuation. Perhaps it chose to list here to avoid the political situation where investments in China could be limited by politics.
(4) Investors here may not be familiar with the Company.

It opened below its IPO price and ended flat today at $1.15 (most likely this is supported by the underwriters JP Morgan and DBS Bank). Let's see if it can prove its doubters wrong.

Ratings - 1 Chilli (Avoid)

RH Energy Ltd

RH Energy provides oil and gas intergration services that includes design, engineering, procurement, construction and installation services to the oil and gas pipeline, storage operators, and oil companies. Its IPO closed on 9 July at 32 cents each and it debuts today on 11 July. Please refer to prospectus here.


4m public offer shares
68m placements shares
Manager, Underwriter and Placement Agent: CIMB

This IPO was 3 chillis hot from the on set as it came from the oil and gas sector. For FY 2006, the sales was S$26m and net profit was S$6.38m. Based on the post-IPO share of 284.93m, the EPS is 2.24 Singapore cents. As of today, Federal is trading at 18x historical PE and KS Energy is trading at 17x historical PE. RH Energy closed at 87 cents today (up an whooping 55 cents from its IPO price or 172%). At 87 cents, it is richly valued at 39x historical PE. Assuming its profit grow at 50% in 2007, its forward PE will drop to 26x and that is still more expensive than KS Energy and Federal (If market is 'efficient', either KS and Federal catches up or RH Energy comes down). A stunning debut for RH Energy nevertheless and finally CIMB can heave a sign of relief as its track record turned for the better.

China Angel Food Limited

Ratings: 3 Hot Chillis (Hoot)

Click here for the prospectus of China Angel Food Limited.

5,000,000 shares by way of Public Offer (very difficult to get from ATM)

98,800,000 shares by way of Placement.'

Manager - Kim Eng Capital Pte. Ltd.

The IPO is priced at 14.8x historical PE. Not exactly cheap if based on 2006 earnings in Singapore context but relatively much cheaper if we compare with the valuation matrix of Shanghai and Hong Kong.

The peers listed in Singapore are trading at very high historical PEs of 19x and the fair value of China Angel is 46 cents based on 2006 earnings but will shoot up to 53 cents when i use a conservative 30% growth in EPS for 2007.

Conclusion: Hoot but will be difficult to get from the ATM

Author is vested

Singapore IPOs

This is a blog that is dedicated to research of Singapore IPOs.
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"Only buy something that you'd be perfectly happy to hold
if the market shut down for 10 years." - Warren Buffett

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The IPOs that are coming up as of today are:

China Angel Food
IPO Price - 35 cents.
Closing Date - 11 July 2007

CMZ Holdings Ltd
IPO price - 23 cents.
Closing Date - 12 July 2007