Tuesday, 3 June 2008

China Taisan Technology Group Holdings Limited



China Taisan is one of the leading manufacturers in the PRC of knitted fabrics used for sports and leisure apparel. Its fabrics are used by reputable apparel brands. It is offering 223.2m new shares and 9.8m vendor shares at 24 cents each. The public tranche is 8m and placement tranche is 225m.

According to the prospectus, if the Service Agreement has been in place from the beginning of FY2007, the net profit after tax would have RMB 182 million. Based on post IPO share base, the EPS is RMB 19.6 cents or Singapore 3.9 cents. At the IPO price of 24 cents, the IPO is priced at historical PE of 6.15x. The growth of this Company has been rather spectacular over the last 3 years. The pre-ipo investors went in July last year and their cost is around 8.76 cents versus the 24 cents.

Assuming profit continue to grow strongly at 50%, the net profit after tax for FY2008 will be around RMB 273m and EPS will be around RMB 29.4 cents or Singapore 5.88 cents. Based on the IPO price of 24 cents, it will be priced at prospective PE of 4.08x. This valuation is rather attractive and in my opinion, downside is limited. Based on the fair value of 6x-8x, the price should be around 35 cents to 47 cents. This IPO should be a stag even under market sentiments based on its valuation alone. Assuming in a situation where profit grow by 30%, the fair value will be between 30 to 40 cents.

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