Tee Land Limited ("Tee Land" or the "Company") is offering 115m shares at $0.54 each comprising 6m Public Offer Shares and 109m Placement Shares. The prospectus is here. The IPO will close on 4 June at 12pm and starts trading on 6 June. An over-allotment option of 23m shares have been granted to the stabilizing manager.
You have to understand that this is a "corporate carveout" or spin-out. Nothing has changed fundamentally, similar to how Fragrance Group spinning out its hotel arm, Global Premium or Capitaland spinning out CapmallAsia.
I guess the advantage to shareholders of Tee International is that it help separate the risk (property and development) from its other business and investors can now choose which piece of the business they like to invest in. To be honest, i never really know that Tee International is a property developer.
Anyway, back to Tee Land. Tee Land is a property developer with a "track record" of residential property development in Singapore. The Company intends to focus on quality property development and expand into commercial and industrial property development. It also intends to strengthen its position in Malaysia, Thailand and Vietnam as well as expand into new markets such as Myanmar, Sri Lanka and New Zealand.
The Company had a revenue of $7.9m for FY2012 and a profit of $1.54m The 6 months audited revenue is $6.7m and profit is $0.67m. Basically you can see that this is a "boutique developer" with "wide-swinging" revenue and profit figures. You should have known by now my dislike for construction-related and property developers as it is really tough to second guess what future performances will be. In any case, the fact that it is a small boutique developer does not help. and i am not sure if it will have the financial resources to expand to so many countries to as far as New Zealand?
They have stated out a lot for risk for you (as in all prospectus) investing in their company. Go read them from page 26-38. 13 pages of risk factors and i do think many of the risk factors are real. The Company is subject to the cooling property measures in Singapore, land sites available for sale, economic and political conditions of the countries which they operate in, and basically they are a small fish in a big pond.
Use of proceeds
The estimated net proceeds of $57.8m is to be used for new projects ($26m), repay loans to Tee International ($15m), repay bank loans ($6m) and for working capital (balance).
The NAV is 31.5c versus the IPO price of 54c, implying a PB of 1.72x. The historical PER is more than 136.7x (before even considering the enlarged share cap). The company shall have a market cap of $241.3m post IPO.
The Company intends to distribute not less than 50% of its net profit for FY2013 to shareholders. Again, i am not privy to how much profit 2013 will bring, perhaps those in the know or who have attended the roadshow can help shed some light. This info is usually 'verbalized' at such roadshows.
"Prominent Pre-IPO shareholders"
The Company managed to "attract' prominent local investors such as Mr. Koh Wee Meng (billionaire founder of Fragrance Group) and Tommie Goh, the ex founder of JIT and 2G capital. They came in at 25c, so it is a "no-brainer" for them but you will have to think very hard why you are coming in at 54c.
I am sorry to tell you that i don't know how to give you a fair value. Most small developers (Hiap Hoe or Singholdings) here are trading below book value. You can see that Fragrance is at 1.85x PB, perhaps that is why Mr. Koh can better appreciate this company than most ordinary folks like you and me. I will prefer Kepland or a bigger developer anytime.
In addition, i have to tell you that i am not too impressed with the track record of SAC Capital either.
Perhaps Mr. Koh and Mr Goh's friends will support this stock during the initial IPO so i will give it a 1 chilli rating (buy only if you like it) but i will avoid it for the longer term and for fundamental reasons (Chopped Chilli).