Sunday, 29 June 2014

Frasers Hospitality Trust



Frasers Hospitality Trust ("FHT" or the "Trust") is offering approximately 182,099,000 stapled securities at Singapore 88 cents each. FHT can be considered as a late comer to the game with many listed peers already listed on SGX. They didn't even bother to "book-build" a price range, as such, investors like you and me will not be able to "gauge" the pricing demand. The market cap will be around S$1.05b








The IPO will start on 1 July 2014 and ends on 10 July 2014 12pm. It will start trading on 14 July 2014 at 2pm.

The reason why i took so long to analyze this counter is frankly because it is too boring... not another Hospitality Trust please....as such, i will try to make it as simple as possible for you to make a decision. 

According to the preliminary prospectus, there will be 136.645m placement units and 45.454m public units. There will be sufficient for most people, so don't have to be too "kan cheong" that you will not get them.

Initial Portfolio

The initial portfolio consists of 6 hotels and 6 serviced residences.


Just take a look at the portfolio and decide for yourself if you like those properties located in those cities. 

The properties are not running at full occupancy, in this regard, there could be some upside should the management find ways to up the occupancy rate.

Over-allotment

There will be an over-allotment option of around 35.6m units in case of "overwhelming" demand. Retail investors would be better off should such over-allotment be exercised so as to create some price support on its debut.

Distribution

There will be semi-annual distributions for periods ending 31 March and 30 Sep each year.

Financial


The distribution yield is around 7% after top-up and drops to 6.5% should the top-up be removed.

Cornerstone Investors

Cornerstone investors took in around 232.949m units. The cornerstone investors are 
  • DBS and DBS private bank
  • Fortress Capital
  • Metro Holdings Ltd
  • Family office of SingHaiYi and Shanghai Summit.

What I like about FHT
  • The sponsor and it associate will continue to hold 65% of FHT post IPO (assuming over-allotment is not exercised). This creates alignment of interest.
  • Experienced board and management team
  • Downside protection through Master Lease and Tenancy Agreement coupled with Sponsor's corporate guarantee
  • A good pipeline of acquisition properties from the Sponsor
  • Long leasehold period and further upside if occupancy improves

My Concerns
  • The properties are spread all over the globe and some are not in key cities (e.g Kobe, Glasslow). In addition, it is a mix bag of luxury, upscale and budget types accommodation. While this may create diversification, there is frankly no synergies for joint marketing among the properties.
  • Currencies exposure vis-a-vis the SGD payout.
  • Income support from "payment top up arrangement". What happens when those support is withdrawn subsequently when the lease expires?
  • Over supply of such type of trust
Listed Peers

According to REIT Data, the peers are trading as follows:


Assuming a fair trading range of between 6.5%-7.5%, the price will trade between 82-95c. 

My gut feel is that given the relatively large float and the lacklustre performance of hospitality trust over the last few months, i believe the upside, if any, is probably limited to a few cents. This is after all, a yield play.

I will give it a one chilli rating. Buy only if you like this trust and believe it will debut between 86-91c on the first day.

Happy IPOing.

Wednesday, 25 June 2014

IPS Securex Holdings Limited



IPS Securex Holdings Limited ("IPS" or the "Company") is a "one-stop" security solutions provider and is placing out 12m shares at $0.35 each for a Catalist listing. There is no public tranche and the IPO will start trading on 30 June 2014.The market cap is $26.3m based on the IPO price.

The Company provides security products and integrated security solutions to commercial entities and government bodies and agencies in Asia Pacific. The map below shows its distribution agreement with Ultra Electronics.


According to the prospectus, the prospects for the Company is good due to heightened security concerns from terrorism and political/social unrest. 

Financial Highlights


The revenue has been erratic of around $5m and then spiking to $10m in FY2013. Net profit has also been pretty erratic and you can see that it is probably they managed to get a big project in FY2013 which resulted in the high turnover and the exceptional profit that year.


Even if i give it the most aggressive EPS of 2.3 cents, the valuation is rich at 16x PE and i don't think current year FY2014 EPS will be close to that of last year. The low NAV of 8 cents per share is not going to help support the share price post-listing either.

Use of Proceeds


The table shows you the majority of proceeds raised are going to the service providers.

Shareholders



The Company will be majority owned by Chan Tien Lok (62%) and Kelvin Lim (16.8%) post IPO. The CEO will draw a pay of $23k a month and has a generous profit sharing ratio. He will be entitled to 10% of the NPAT if NPAT is > $800,000


Mr IPO ratings

There is no public tranche and frankly the valuation is rich and the CEO is well paid. You can find better quality companies at lower valuation. In this regard, i will give it a 0 Chilli rating and give it a miss.

Tuesday, 24 June 2014

SMJ International Holdings Ltd



SMJ International Holdings Ltd ("SMJ" or the "Company") is placing out 20.24m shares at $0.28 each of which 14m are new shares and the balance are vendor shares. There is no public offer and the Company will list on 30 June 2014 on the Catalist. The market cap of the company is $21.84m based on the IPO price.

SMJ is a carpet specialist serving the commercial and institutional sectors in Asia and has a track record of more than 25 years.


If you want to know exactly what they do... the picture below will tell u. They lay carpets for your work place.


Financial Highlights


The charts shows a stagnating top and bottom line over the last 3 years. Nothing exciting or worth shouting about.



Based on the fully diluted EPS of 3.5 cents, the IPO is valued at 8x FY2013 PE. It is probably fairly valued.

The NTA of 19c will provide a psychology support should the price fall on its debut.

Use of Proceeds


You can see from the use of proceeds who is the biggest beneficiary from its IPO! It will be the service providers!

Shareholders


This is a family owned business with the family still owning 70% of the company post IPO and the two sisters are the CEO and deputy CEO.

Dividend Policy

The Company intends to distribute 30% of its profit after tax as dividends to its shareholders for FY2014 and FY2015. Assume EPS remains the same as FY2013, the back of the envelope yield at IPO price will be around 3.75%.

Mr IPO's views and Conclusion

Since there is no public tranche and that i am not vested, i will not spend too much time on it. This is a small cap company in a competitive environment. 
Put yourself in the shoes of the corporate renovating the office, do you really care if the carpet in your office is of the SMJ brand and do you even bother to contract SMJ directly or will you just leave it in the hands of the interior designer? From the interior designer perspective, you will just source for the cheapest available carpet of decent quality. Would you even bother if the carpet has "500 threadcount" and is of SMJ brand? In other words, i don't think SMJ has any "pricing" clout when it comes to supplying the carpet. It will have to fight it out with the cheapest supplier and the supplier can be from Indonesia, Malaysia or China.Maybe you might want to find out what brand of carpet your office is using tomorrow and see if you can spot the SMJ brand!

I will give it a 0 Chilli rating and will not apply even if there is a public tranche. The shares are probably better suited to be placed out to friends and family and i am sure HL Finance will do a good job in that regard.

Happy IPOing
  

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