Soo Kee Group is offering 112.5m shares of which 103.5m is for placement and 9m for public offer at $0.30 each for a listing on Catalist. The IPO will close on 12pm on 18 August 2015. The market cap of the company will be $168.8m
The Company is a leading and established jeweller based in Singapore with more than 60 retail stores in Singapore and Malaysia. It's vision is to bring high quality jewellery products to customers. The milestones of the Company is listed below.
They have different brands targeted at different customers profiles and the brands in the portfolio include:
The revenue has been hovering around $129-143m for the last 3 years but the Company was able to improve its net margin in 2014 due to lower rental costs. Seems like the revenue is stagnant. Based on the EPS of 1.9 cents per share, the Company is being priced at 15.8x. Not exactly attractive and fairly valued as its bigger local peer Aspial (see below).
The Company intends to pay 20% of its net profit for FY2015 and FY2016 as dividends. Assuming EPS remains the same, the dividend will be around 1.9 x 0.2 = 0.38. That will translate into a yield of ~1.28%, also nothing to shout about.
Use of Proceeds
The Company is using the proceeds to move into a new HQ and for repayment of loan. Hopefully this can help streamline and reduce rental costs further.
What I like about the Company
- High recognizable brands in Singapore with over 20 years of history
- Experienced management team in this industry
- Large network of 60 retail stores strategically located in prime shopping malls
- Increasing profits for the last 3 years
Some of my concerns
- Changing consumer patterns and challenges from offline stores
- Limited and saturated growth in Singapore and Malaysia
- Stagnating revenue - This is after all a consumption play. While disposable income in Singapore and Malaysia will likely to rise over the coming years, the economies are facing uncertainties currently
- Share placement is huge at 103.5m. I understand the Company has done the majority of the placement themselves (except for the headcount) and i am not privy as to who they have placed the shares to.
- Low NAV of only 7 cents per share versus the IPO price of 30c. It will create a big windfall for the founders but you can argue that it is "deserving" given they have build up this business over 20 years but i thought they should have left something on the table for investors by pricing it lower.
- 80% of the company will still be held by the the Lim family of siblings (Lim Yong Guan, Lim Yong Sheng and Lim Liang Eng).
- Depreciation of MYR against SGD will be detrimental to the financials and affects the buying power since diamonds are sourced from overseas. Having said that, it derives ~14% of the revenue from Malaysia.
Listed Peers Valuation - Aspial
The ratios of Aspial is listed below but looking at the first half performance of Aspial, it doesn't seem very encouraging for the industry.
Mr IPO's ratings
I will give this a 1 chilli rating just to support our local brand who dare to launch its IPO during the ghost month. hahaha but given the bearish sentiments and valuation of Soo Kee, it may be a good idea to stay on the sidelines unless you are privy to who they placed out the shares to.
Happy IPO glittering.