Global Logistic Properties launched its IPO at $1.96 per Offering Share. According to sources, the demand from institutional investors were hot, as such, they ended the book building period earlier than expected and priced it at the high end of the range (which to me, means that the counter is likely to be fairly priced and has a much lower margin of safety). The company is offering 1.07 billion shares via placement and 102.3m shares via public offer. Cornerstone investors have subscribed for approximately 589m shares but has no moratorium. Investors may apply for the IPO using their CPF monies. The offer will close on 14 Oct at 10am and list on 18 Oct and the offer is subject to over-allotment as well as stabilization by the manager.
The prospectus states that the Company is a market leader in modern logistic facilities in China and Japan (why Japan? i wonder. I guess they have to package it nicely to offload the under-performing but mature Japanese properties???)
Revenue rose from US$250m in FY2008 to US$412m in FY2010 and according to the prospectus, China economic and demographic conditions will drive demand for logistics facilities while Japan will provide a stable cash flow. For the year ended 31 March 2010, the Company incurred a profit of US$240m before a drop in fair value of its properties by $369m resulted in a net loss of $149m for the year. However, for the 3 months ended 30 June, the company made $116.4m before fair valuing its properties upward resulted in a net profit of $500.6m for the same period.
The IPO is fairly priced at a slight premium to its book value, i.e. approximately 1.086x its book value. This is one of the mega IPO in Singapore for 2010.
Without considering any fair value changes to its portfolio, assuming a pro-rated profit of US$465m and a USD/SGD rate of 1.30, the implied EPS will be Singapore 10.68 cents and at the IPO price of $1.96, it translate into a forward PE of 18.35x
The top guys in this Company (Jeffrey Schwartz and Mr. Ming z Mei will make about US$2m a year each before share bonus while the top management team of 4 others will draw at least S$ 3.75m in total.
The cornerstone investors include Alibaba.com, National Social Security Fund of China, CBRE GRES, Chow Tai Fook, Peter Lim Eng Hock, ING Clarion Real Estate, Lion Global Investors, Nan Fung Group and Owl Creek.
Conclusion: The IPO is fairly priced (but not aggressively overpriced), i believe the company is poised to grow even bigger in the coming years and the IPO proceeds will be the catalyst and the bullets it will need. The 'fair value' accounting of its properties will, without doubt, bring uncertainties and volatilities to its earnings. With stabilization manager and overwhelming demand, investors should have no problems 'stagging it' on its first day but i will drop the 3 chillis rating to 2 as it is priced at the higher end of its IPO range.