Serrano Limited ("Serrano" or the "Company") is offering 30m shares comprising 22.5m New Shares and 7.5m vendor shares at $0.23 each. 28.5m shares will be place out with about 1.5m shares for the public. The offer will end on 23 Oct 2014 at 12pm and will trade on 28 Oct 2014. The market cap of the Company is around S$34.5m shares.
The Company is a leading interior fit-out solutions company in Singapore and South East Asia. If i can use a simple term, you can call it the "interior designer" for property development firm in fitting out the properties.
Some of the well known properties in Singapore which you may be familiar will be D' Leedon, The Interlace, Reflections at Keppel Bay. The list below is the on going projects for 2015.
As of the date of the prospectus, the order book stands at S$69.7m.
The revenue has been increasing steadily with net profit jumping from $0.6m FY2011 to $3.2m in FY2013.
The EPS for FY2013 based on the enlarged share cap is around 1.70 cents and that translate into a PER of 13.5x.
What I like about the Company
- A long list of on-going projects with some prestigious projects
- Generating revenue from Myanmar, the last frontier in South East Asia
- Share price of 23c is close to its NAV of 16.9c
Some of my concerns
- Vendor selling some shares
- Exposed to the cyclical property cycle
- Small cap stock
- A long list of pre-ipo investors, many whom i am not too familar with.
- Declined profitability for half year 2014
- Family run business with many family members in the firm.
- Company is a cashflow negative company as it has to finance the projects with bank borrowings and then collect the cash from the main contractor
Mr IPO ratings
I am giving it a 0 Chilli rating for the following reasons:
- Company is fully valued at this juncture with likelihood of a decline in profits for FY2014 given that HY 2014 has been disappointing. Having said that, the revenue recognition can be pretty lumpy for such companies.
- Property cycle turning downwards in Singapore
- Highly geared company and negative cash flow
- Vendors are selling at IPO price
- Market sentiments is weak