Far East Group Limited ("the Company") is offering 18.8m new shares at $0.27 via placement for a listing on Catalist. The offer will close on 4 Aug at 12pm. Founded in 1953, the Company is one of the pioneers in the refrigeration and air-conditioning business in Singapore.
The Company's revenue grew from $29.2m in FY2008 to $32.6m in FY2010 and net profit rose from $1m to $4.6m during the same period. The adjusted EPS on fully diluted basis on the post IPO share cap is Singapore 4.8 cents. That translate into a historical listing PER of 5.6x. The market cap at IPO is $19.5m.
This company is really 'cheap' in terms of valuation. It has one of the lowest 'dilution' to NTA at only 2.2 cents and the PE valuation is really on the cheap side as well. Not sure why the owners of this company would want to list at such a low valuation. However, one interesting point to note that the Company has outstanding liability from the FY2011 declared dividends of about S$2m of which 50% will be settled in current year and the balance the following year. The Company also intends to distribute at least 20% of its net profit attributable to shareholders for FY2011 and FY2012.
One of the more closely related listed peers in Singapore, Natural Cool, has revenues of $148.5m and net income of $6.7m in FY2010. It is trading at a PE of only 2.8x and price-to-book of 0.5x.
Basically the Company is already very cheap but there is even a 'cheaper' that has better revenues and valuation. My gut feel is that downside is somewhat limited but unfortunately there isn't much upside either in the near term.