Saturday, 26 September 2009
Great Group holdings must have employed Superman to be its underwear spokesman. The share price debut at 31 cents and fly all the way to a high of 43 cents before closing at 41.5 cents, up a whopping 40% from its IPO price. The volume traded was a whopping 86.8m shares, more that the no. of shares issued and sold by vendors for this listing! Gaoxian's underwriter and issue manager could well learn a few tricks from Daiwa by limiting the number of shares issued and placing the shares to strong hands who can then do some post market activity. Shortists who tried to short the counter were certainly caught with their pants down this time. hahaha :)
Wednesday, 23 September 2009
Emergence of an abalone behemoth
Initiate coverage with BUY; Target price at S$0.520. Oceanus, the largest land-based abalone producer, is gunning to be the first vertically integrated abalone group. Its tie-up with renowned restaurant chain, HK-based Ah Yat Abalone Group, is particularly exciting. With plans for 170 stores by FY11, the JV may be able to rake in as much as RMB100m in earnings. If it were to list by then, it should be able to easily dwarf all restaurant groups in Singapore. Organically, its production business continues to thrive and we expect stronger sales in FY10.
Volume and cost leader can potentially drive market share gains. As the largest abalone producer, it has ~110m caged abalone ready for sale (excluding ~140m uncaged young abalone) and a staggering 12km2 of abalone farm stretching from Zhangzhou (Fujian) to Guangzhou (Guangdong). Given economies of scale, it is able to sell its abalone more cheaply compared to its competitors (RMB0.30/kati vs RMB0.60-0.70/kati). Oceanus can potentially consolidate the market by reducing its price, a move which we consider to be plausible.
170 restaurants to earn RMB100m by FY11. Oceanus entered into downstream abalone retail and processing business through a 70:30 JV with Ah Yat in favour of Oceanus in 2H08. The restaurants are targeted at the mass affluent rather than the rich. Currently, there are six operating outlets in Shanghai and Hong Kong with 16 more to come by the end of year (including one in Singapore which will open on 21 Sep 09). Management targets 170 restaurants and RMB100m earnings by FY11.
Attractive vis-à-vis peers. We expect Oceanus' PATMI to rise 46% and 25% for FY09F and FY10F respectively on the back of growing number of profitable retail outlets and the contribution from the processing business. Our target price of S$0.520 is based on a 30% discount to the peers' P/E relative to their respective indices (15.6x FY09 and12.2x FY10P/E).
Oceanus Research Initiation by DMG
Sunday, 20 September 2009
Great Group Holdings is an established undergarment manufacturer in the PRC. It is the contract manufacturer for ODM and OEM basis as well as under the "GRAT.UNIC" brand. The Company is offering 65m new shares and 15m vendor shares at $0.295 each. 78m shares will be via placement and 2m shares via public offering. The offer will end on 23 Sep 2009 at 12pm.
Revenue grew from RMB 146.4m in FY 2006 to RMB 400.8m in FY 2008 and net profit grew from RMB 22.2m to RMB 70.8m in the same period. Assuming the service agreement was in place at the end of FY2008, the EPS per share will drop from 7.2 Singapore cents to 7.15 Singapore cents. Based on the post-IPO shares of 265m shares, the pro-forma EPS will be Singapore 5.40 cents and that translate into a historical listing PE of 5.46x. The NAV per share after listing is 18.29 cents and the market cap is $78.18m. It is a shame that i could not find 1H 2009 unaudited results in the prospectus considering that we are already in Sep 2009!
The directors intend to distribute 20% of its net pforit for each of FY 2009 and FY 2010. Unfortunately, i am unable to predict what kind of profits we can see in this year and next even though the historical growth rates has been impressive as there are no 1H09 earnings included in the prospectus. In most normal cases, if the company is doing well, they would be "dying" to include the 1H figures in the prospectus. I really wonder what is the SGX regulations with regards to this (unless i am really blur and miss out the figures in the prospectus).
Listed S chips in the garment sector include Bright Orient, China Fashion and they are either not doing well or trading at pathetic valuations. As such i believe the IPO is fairly priced. Assuming a PE range of 4-6x for this undergarment company, the fair value will be 22 cents to 32 cents. Looking at the trend of the last 2 S chip IPOs, Passion and China Gaoxian, i suggest giving this IPO a miss if your only intention is to 'stag' it.
Friday, 11 September 2009
Revenue grew from RMB 1.015 billion in FY 2006 to RMB 1.830 billion in FY 2008. Net profit grew from RMB 203.1 million to RMB 390.4 million in the same period. The EPS based on post-invitation share capital of 1.44 billion shares will be RMB 27.11 for FY 2008 (or Singapore 5.69 cents using an exchange rate of RMB/SGD of 4.75). At the IPO price of 26 cents, that translate into a historical listing PE of 4.57x. The NTA per share after accounting for IPO proceeds is Singapore 13.34 cents.
While the pre-ipo investors are cashing out at the IPO via vendor sale, the "good thing" is that they have undertaken a 12 month moratorium period instead of the usual 6 months, which is good under current market.
The listed comparables such as Li Heng are trading at 3.92x 08 PE and China Sky at 2.58x 08 PE respectively and it is tough to prescribe a higher multiple to this company when the peers are not doing too well. Much will depend on the IPO sentiment on its debut. The fact that it has a huge float and is one of the biggest IPO this year may not help in sustaining the share price post listing. Without considering any growth in the 2009 profit figures, a fair value of 4-6x PE will translate into a price range of 23 cents to 34 cents. My view is that the positive sentiment will give it the initial boost but dont bet that it will stay high for too long unless the entire S-chip fibre sector is re-rated upwards.