Friday, 7 March 2008

Joyas International Holdings Limited


(IPO booth at Raffles Place - compliments from Fergus)

Joyas International Holdings Limited ("Joyas") is principally engaged in the design, manufacture, packaging and sale of metal gift and jewellery products. The Company is offering 1m shares at $0.29 for public and 27.8m shares at $0.29 for private placement. The offer will close on 11 March 2008 at 12 pm.

The profit of 1H07 is flushed with gains from disposals of lands and buildings, which was disclosed on page 46 and 66 of the prospectus. The EPS for 1H2007 (excluding gains from disposals) and using the post-invitation number of shares is 9.93 HK cents. Assuming full year EPS is 20 HK cents (1H07 x 2) or Singapore 3.56 cents.

At the IPO price of 29 cents, Joyas is priced at a historical PE of 8.15x. The market cap of the Company is S$31.1m.

Basically this is a small cap stock and the Company is already fully valued at current IPO price. Avoid.

Li Heng Chemical Fibre Technologies Limited


(IPO booth at Raffles Place - Photo compliments from Fergus)

Li Heng Chemical Fibre ("Li Heng") is offering 400m shares (340m new shares, 60m vendor shares) at $0.80 each. 10m shares will be for the public while 390m shares will be privately placed out. It is amazing that under current sentiments, the vendors are still allowed to cash out at IPO. Closing date is 10 March 08 at 12pm. Market cap is $1.36 billion based on 1.7b shares at IPO price of $0.80. The cost per share to the Pre-IPO investor is around 41.58 cents (versus IPO price of 80 cents).

Li Heng is primarily in the business of manufacturing and selling high-end nylon yarn products in China. The main listed rival on SGX will be China Sky. To get a better feel of Li Heng, let's look at 2006 and 2007 financial results of China Sky:

2007 sales - $449.1m. Net profit - $127.9m. EPS - 16.1 cents
2006 sales - $374.4m. Net profit - $102.8m EPS - 14.3 cents

The financials for Li Heng is as follows:

2006 sales - $338m. Net profit - $95.2m. EPS - 5.6 cents
2007 1H sales - $285.8m. Net profit - $93.7m. EPS - 5.51 cents.

Assuming 2007 full year sales doubled. Sales will be 571.6m and net profit will be $187.4m. The EPS will be 11.02 cents. Based on the IPO price of 80 cents, it is priced at 7.3x 2007 PE. China Sky's share price at the close of March 7 is $1.07, the share price of China Sky is trading at 6.6x 2007 PE.

It appears that China Sky will present a better investment opportunity than Li Heng. My suggestion is to keep your cash at bank and save the IPO application fee of $2. On a longer term basis, assuming a fair value PE of 8-10x, Li Heng's fair value will range from 88 cents to 110 cents.

Thursday, 6 March 2008

Roxy-Pacific Holdings Limited


(IPO booth in Raffles Place. Photo compliments from Fergus)

Roxy Pacific is basically a niche property developer and the owner of Mercure Roxy Hotel. In FY 2006, its revenue is $48.8m and net profit is $5.2m. The IPO details are:

7m shares for Public at $0.30 each.
126m private placement shares at $0.30 each.
Issue Manager: Hong Leong Finance
Closing date: 10 March 2008 12pm.

Revalued NAV per share as of Dec 31, 2006 = 45.39 cents. This is higher than the IPO price of 30 cents. I do have to caution that "Valuation" is a rather subjective matter as it depends greatly on many different factors. In this regard, the revalued NAV may not represent the actual value in a real transaction. Based on the IPO price of 30 cents and post-invitation shares of 636,560,000 the market cap is around S$190.97 million.

The 1H 2007 revenue is $42.4m and net profit is S$7.7m. Frankly it is not easy to do a forecast for a property developer cum hotel operator because the revenue of a property developer depends greatly on the projects on hand and the revenue recognition policy while the revenue from a hotel is fairly stable and depends on the occupancy and room rates. Assuming i do the lazy way of doubling the 1H profits for FY2007, the revenue for 2007 will be around $85m and the net profit will be $15.4 million. EPS will be 2.4 cents. Based on the IPO price of 30 cents, the 07PE is around 12.5x.

Listed competitors on SGX includes Fragrance and Fragrance is trading at a better valuation of 13x 2007 PE as well as a premium to its NAV. If we use Fragrance as a key comparison, it seemed that Roxy is undervalued and there will be further upside if it can trade towards its revised NAV of 46 cents.

Personally i dont really fancy the Singapore property market and will avoid the IPO market for now given the extremely volatile market conditions for both the stock and property markets.

Monday, 3 March 2008

Market Sentiments & IPOs

Last Friday we saw that launch of 3 IPOs, namely Joyas, Roxy-Pacific and Liheng, of which the biggest will be Li Heng. The underwriters tried to launch the IPOs when market was in the midst of staging a technical rebound and improving sentiments; what the underwriters didn't expect was the steep decline on Wall Street on Friday which dampened the mood and sentiments on Monday.

This period is one of the toughest to launch an IPO unless the owners are willing to sell their companies at very low single digit PEs (maybe 3-4x PE) if they want the price to remain above water post the listing. Let see how it goes for the 3 brave ones. I will follow up with a more detailed analysis of the 3 companies in the coming days but unless you are belong to the brave ones, my suggestion is to avoid applying for the IPOs for now. The risk is just not worth the effort.

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