AGV Group Limited ("AGV Group" or the "Company") is offering 26.92m shares via placement at $0.22 each, comprising 21.82m new shares and 5.1m vendor shares for a listing on Catalist. The offer will close on 24 August 2016 at 12pm. The market cap based on the IPO price is S$27.7m.
I don't intend to spend too much time on this IPO as all the shares are placed via placement.
The Company is one of the leading providers of hot dip galvanizing services in Singapore to steel and iron fabrication industries with a well diversified client base.
According to the prospectus, the competitive strengths are as follows:
- market quality services at competitive prices
- attuned to customers' needs
- experienced and management team
- established business relationships and extensive networks
While the revenue is growing steadily, this is still a small cap company with revenue of less than $20m. The first half profit for FY2016 is actually lower than that of FY2015.
Based on the EPS (post-placement share cap) of 1.78 and assuming the service agreement is in place, the IPO is priced at a PER of 16.6x. This is not exactly "value for money" in Singapore context.
Some of my concerns include:
- This is a small cap company with revenue less than $20m and in a competitive industry
- Vendors are cashing out at the IPO
- There is a long list of pre-ipo investors who invested at around 8.8 cents who may want to exit
- The listing valuation at 16x historical is not exactly compelling
- The current IPO sentiments and climate is weak
For the above reasons and given there is no public tranche, i will give it a zero rating.