Monday, 3 August 2009

PEC Ltd


(IPO booth at Raffles Place)

Finally a mainboard listing in such a long time!!...

PEC is a specialist engineering group servicing the oil and gas, petrochemical, oil and chemical terminal and pharmaceutical industries. PEC is offering 2m shares for public subscription and 61m shares via placement at 40c each. IPO will close on 5 Aug 2009 at 12pm. The public will hold 26.5% after the IPO.

Revenue has grown from S$149.3m in FY2006 to S$314.6m in FY2008. The net profit after tax also increased by S$8.3m to S$27m in the same period. Revenue for 1H2009 is $220.6m and net profit is $12.4m, an increase by 88% and 8.35% respectively. Based on post invitation no. of shares 238m, the EPS for FY2008 is 10.55 cents. At the IPO price of 40c, the IPO is priced at 3.79x.

Assuming FY 2009 profit is S$29.2m, the EPS will be 12.3 cents. Currently Rotary is trading at 12.8x historical. If we give it a 30% to 40% discount given its 'smaller' size and newly listed status, the fair value PE range will be around 7x to 9x. That will translate into a fair value of 86c to 111 cents.

The IPO is attractively priced and offers good value and potential to more Middle East EPC contracts. Investors will do well to subscribe to this IPO as downside is limited.

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