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.
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!
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.
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.