GDS Global Limited ("GDS") is offering 17.5m shares at $0.25 each, comprising 12m New Shares and 5.5m Vendor Shares for IPO on the Catalist. 1m shares will be for public offer and the balance 16.5m share via placement. The offer will close on 17 April 12pm and starts trading on 19 April. At least CIMB is doing something more "courageous" than some other boutique outlets. It is letting public investors have a "chance" to play in the Catalist field and i must applaud them for that.
According to the prospectus, GDS is one of the leading commercial and industrial door manufacturer in Singapore.It is also one of the few players who are able to supply steel insulated fire shutters.
As you can see from the financial highlights, this is a truly small cap company with low revenue and profit levels. In my personal view, investing in such small companies can be very risky.
The Company intends to pay dividends of not less than 30% of its net profits attributable to shareholders in each of FY2013, 2014 and 2015. While this is a good intention, somehow, may not be appropriate for a firm who is supposedly growing at a fast pace and needs the cash for expansion.
For such a small cap catalist listing, i don't like the owners to be seen as cashing out. They should issue more shares instead of selling out.
Assuming the service agreement has been in place and based on the enlarged share of 112m, the listing PER will be 10.92x. This is not exactly good value and even if i factor in a 20% growth (just a guess) in 2013, the PER is around 9x. The market cap based on the IPO price is around $28m.
There is a listed peer in KLW. The website is here. KLW is trading at a PER of 48x and has a market cap of $20m but this doesnt mean that GDS is a good buy. In fact, i wouldn't have invested in KLW in the first place.
The Company is listing on the back of positive market sentiments and at a low absolute price of $0.25, there will be no lack of punters and speculators. My prediction is that given the small float, it will probably open with a bang and the subsequent movements will depend greatly on whether the stock is cornered or not. You may want to try your luck but note that this is not for long term investing and remember to be thankful if you can stag it as there will probably be heartache for people who chase this stocks post listing. I will avoid for long term investment but may consider it for a quick punt.