Mencast Holdings Ltd is offering 22.5m new shares priced at 28 cents per share of which 1.5m shares will be offer via public and the remaining through a private placement. The Company manufacture and supply sterngear equipment and provide sterngear services for a wide range of commercial vessel-applications.
Revenue increased from S$11.65m in FY05 to S$18.8m in FY07 but net profit improved from S$707k to S$4.8m in FY07 indicating a strong improvement in net margin from 6.1% to 25.5% over the last 3 years.
Based on the IPO price, the market cap is S$41.3m. An ultra small cap company on Catalist. The EPS for FY2007 bsaed on post-invitation shares of 147.5m is 3.27 cents. The Company sold itself at a valuation of S$24m to pre-ipo investors on 30 May 2008 (or 19 cents per share), it is amazing that within a short span of less than one month, it can repackaged itself to sell to the market at 28 cents per share at a significantly higher valuation. The identity of the pre-ipo investor was not disclosed as it holds less than 5% and is not selling any vendor share. Personally, i dont like such 'restructuring' within a short span of time. There are several possible reasons for doing this pre-ipo transaction - (1) Owners want to cash out but didnt want to sell vendor at IPO for fear of depressing the market; (2) Underwriters want to find some strong hands to anchor this IPO but anchor will only come in a lower price as he/she will be subject to 6 months moratorium. (3) Special arrangement with underwriters, etc. I have no idea what the reasons are but certainly never like this kind of 'restructuring' as i am not the one who benefited from it but i would have preferred if the identity of the pre-ipo investor was disclosed. :P
It also seemed amazing to me that the margins can improve so strongly over the last 3 years and personally, I would like to adopt a 'wait-and-see' attitude on the sustainability of this margins in the next few quarters. I would rate this a 1 chilli counter and observe this company for a longer while.