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Sunday, 29 June 2008

Healthway Medical Corporation Limited



Healthway Medical Corporation Limited is offering 135.5m shares (95.5m New shares and 40m Vendor shares) at 36 cents each. The Company is one of the largest healthcare outpatient service provider in Singapore. (This is like the Raffles Medical Group when it just started out, eventually, it will want to set up its own specialty practices and hospitals to improve the margins.)

Frankly to me, Singapore is already a small and saturated market and the listing is 'inevitable' to tap new capital to expand overseas. As you can see from the revenue, it has grown from S$66.6m in FY2005 to S$84.6m in FY2007. Net profit increased from S$13m to $16.6m over the same period. The joke is that the Company has a pro-forma Net Tangible Liability of 4.02 cents and a net asset value of 9.21 cents post IPO dilution based on 31 Dec 2007. The EPS is approximately Singapore 1.20 cents (assuming service agreement is in place and based on outstanding shares post-IPO).

At 1.20 cents EPS, the IPO is priced at 30x historical PE! Assuming EPS grow by a very "aggressive" 20%, the EPS for FY2008 will be Singapore 1.44 cents and that will translate into a PE of 25x.

For the year ending 31 Dec 2007, Raffles Medical Group has revenue of S$168m and net profit of S$35m. The EPS was 7.36 cents and as of 29 June 2008, RMG is now trading at a valuation of 20x historical. It took RMG a few years and i believed the earnings only 'spike up' after the Raffles Hospital was set up. In my view, the execution of Healthway is still a big question mark and at this IPO valuation, investors are better off parking there money in Raffles Medical Group. In addition, some accounts of the Companies in Healthway are qualified by the auditors... the market cap of Healthway based on the IPO price is $487.8 million (w0w...).

My view is forget about this IPO and put your $ to better valued stocks elsewhere. If you really must invest in this Healthcare sector, you may want to do a more indepth analysis on Raffles Medical Group.

Wednesday, 25 June 2008

China Fibretech Ltd

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.

Monday, 23 June 2008

Mencast Holdings Ltd.

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.

Sunday, 15 June 2008

Combine Will International Holdings Limited



Combine Will ("CW") is offering 88 million new shares at S$0.23 per share of which 5m will be for public and the rest via private placement. The Company is based in Dongguan, Guandong Province and there are 3 main business segments - ODM/OEM of plastic and die-cast products, moulds and tooling and machines sales. The IPO will close on 19 June at 12pm and will commence trading on 23 June.

Audited revenue for FY06 is S$174m with net profit of S$5.47 million. For the 9m ended 30 Sep 2007, the sales is S$153.5m and net profit is $10.5m. It is amazing that the Company was unable to disclose its full year audited figures for 2007 as it is already the June period, almost close to the end of the statutory reporting for companies with financial years ending on 31 December.

Based on the post IPO shares of 328m shares, the market cap is around $75.4 million. This is really a small cap company. Assume a full year profit of S$14m to S$17m, the EPS will range between 4.3 cents to 5.2 cents. At the IPO price of 23 cents, it is trading at the PE range of 4.4x to 5.3x, which is typical of small S-chip stocks in Singapore.

I will avoid this counter for now due to its small cap status, competitive segment and poor IPO sentiments.

Thursday, 12 June 2008

A test of investors' will?

It is amazing that HL Bank is launching its 2nd IPO of June, Combine Will International Limited. Frankly, the English name of this company really sounded like one that is 'bought off-the-shelf' and is really 'testing' the will of the market.

The performance of the recent IPOs have been lacklustre and i will not be surprised if Combine Will trades below water post its IPO. On another IPO, I was informed by my DBS broker that it is no longer underwriting for China Fibertech and i wont be allocated the IPO shares and i heaved a sign of relief.

Let me do a write up on Combine Will when i managed to hold of that hard copy prospectus... (too lazy to read the online version...)

Sunday, 8 June 2008

Sino Construction Limited



Sino Construction Limited was established in 1998 and is principally engaged in building construction and civil engineering activities in Daqing City, the PRC. The Company is offering 152.698m shares where 6.398m shares are offer for public and 146.3m shares are for placement at 39 cents each.

I never like the construction sector. If this sector is already considered "dirty" in Singapore with all the under-table bribery and gifts, how "clean" can it be in China. In addition, this Company is registered as a Class II, that is, it can tender for projects up to RMB 500m (or S$100m) and personally i think that is on the 'low' side. In addition, it is only a smallish construction in a small city of Daqing in the province of Heilongjiang. The net profit for FY2007 is RMB168.5 million. The EPS post IPO is RMB 28.25 cents or Singapore 5.65 cents. The NTA is only 12.2 Singapore cents. Pre-IPO investors came in at 23.4 cents (versus the IPO price of 39 cents) and most of them are selling out half of their shareholdings at the IPO.

Assuming EPS grow by 10% in FY2008, it will be 6.2 cents. At IPO price of 39 cents, it is priced at forward PE of 6.3x. I think the issue is fairly priced under such weak IPO sentiments and there will not be any upside. I cant recall any construction firms that are listed on SGX but would consider this Company as fully valued and in a sector that i personally dont like. I will avoid applying for this IPO.

Wednesday, 4 June 2008

Indiabulls Properties Investment Trust



Indiabulls Properties Investment Trust offers investors exposure to the booming Indian economy and to the rapidly growing services sectors. The Trust has an initial portfolio of 2 commercial development properties located in the upcoming business district of Lower Parel in Mumbai.

The Trust is offering 262,483,183 units at between S$1 to S$1.10 for subscription. The projected yield for FY2009 is between 4.7% to 5.1% and 8.9% to 9.8% for FY 2010. For your information, the fiscal year FY2009 is from April 1, 2008 to March 31, 2009. The yield is expected to increase in conjuction with the progressive completion of the projects.

Basically this is an Indian REIT play and a comparable peer on SGX will be the Ascendas India Trust. The market cap of Indiabulls is around S$3.6 billion and that is considerably bigger than Ascendas India Trust. The yield of Ascendas India Trust is around 5.6%.

Bascially i have no comments on whether to subscribe or not as REITs are bascially yield play and valuation of the properties are usually very subjective in nature and there are inherent risks investing in the India market. If this REIT suits your investment appetite and you are bullish on the Indian property/rental sector, then apply for it. Given the current market sentiments and the huge fund raising, let's see if there is adequate appetite this latest REIT.

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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