China Fibretech Ltd. is selling 89.1m new shares and 44.55m vendor shares in its IPO at 21 cents per share. Only 2m shares are available for public offer and the IPO manager did not even bother to set up an IPO booth at Raffles Place. I understand from a broker friend that he has been asked to 'help subscribing' for 2 lots of the IPO public tranche to make up the minimum number of shareholders required by the listing regulations.
The Company was principally engaged in the provision of the dyeing and post-processing treatment services for cotton, polyester and mixed knitted fabrics.
I have no idea why the Company is still using its 9 months results for FY 2007 in its prospectus. It should have used the full year results in its prospectus. The market cap based on 445,509,625 shares at 21 cents is around S$93.6 million. The Company intends to distribute 30% to 40% of FY08 profits and 20% to 30% of FY09 profits as dividends.
As of 30 Sep 2007, the company's EPS is around Singapore 3.39 cents (increase of 59%). Assuming the full year EPS for FY07 increased by the same percentage, the EPS will be Singapore 4.62 cents. At the IPO price of 21 cents, it is priced at 4.5x 2007 PER.
The issue is priced competitively at 4.5x 07 PER. Assuming EPS grow by 20% for FY2008, the EPS will be Singapore 5.54 cents and the PER will be around 3.8x and this valuation is probably in line with China Sky.
The downside is limited based on the attractive valuation in which it is priced but i am giving it a 1-chilli rating probably because of the weak market sentiments and lack of post-ipo support. I am vested through the placement tranche (I need to show some support in good times and bad times)......let's see how it goes... looking at the trend of the recent IPOs, it should open around 10% to 20% lower than its IPO price.