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Monday, 31 December 2007

Singapore IPO 2007 ranking

(Source: Bloomberg)

Here is the ranking of the IPO underwriters in Singapore for the year 2007. UBS ranked no.1 on the list in terms of amount raised, while DBS ranked top in terms of the number of issues it underwrote. Sterling Coleman lead in terms of the fees earned.

Here is wishing all blog readers a happy and prosperous 2008.

Sunday, 16 December 2007

JES International Holdings Limited

The Company is a major PRC shipbuilding group with production facilities capable of producing different types of vessels. It produces bulk carriers, containerships, ocean engineering vessels (mainly crane barges for offshore oil sector and offshore construction building works) and RO/RO vessels. Our customers include major shipowners based in Europe, Canada and Asia, including the PRC.

Public offer of 16.195m shares at $0.67 per share.
Placement offer of 356.94m shares at $0.67 per share.

2006 results:
Revenue US$159.7 million
Net profit US$17.3 million

2007 1H results:
Revenue US$77.8 million
Net profit US$11.2 million

Assuming full year profit is doubled to US$22.4m, the EPS will be US 1.96 cents or Singapore 2.83 cents. Based on IPO price of S$0.67, it is priced at 2007 PE of 23x. Assuming EPS grow by another 30% in FY2008 to Singapore 3.68 cents, based on PE range of 20x-25x, the fair value will be between 74 cents and 92 cents.

While i certainly like this sector (ship building sector) in China, it is unusual to see the "Authority" requesting the following risks to be highlighted. Perhaps they know something which we dont!??! Anyway, the bigger rival listed here is Yang Zi Jiang and it is trading at around 35x 2007F PE.
The 'warning' on the prospectus is listed below and it is a serous issue if they are unable to deliver the vessels to its clients on time!

At the request of the Authority, we have been asked to prominently highlight the following specific risks to be considered in connection with an investment in the Offering Shares:

Because our existing shipyard is operating at full capacity, we may not be able to successfully coordinate the construction of vessels to meet their scheduled delivery dates if the New Facility is not constructed within the scheduled time or at all.

Our contemplated construction of the New Facility is subject to certain conditions and may not be consummated within a reasonable time or at all. If the New Facility is not completed as planned, we could be exposed to potential liabilities under contracts for vessels intended to be constructed at the New Facility if such contracts become effective.

We have no control over the purchase price in relation to the contemplated acquisition of the land use rights in relation to the 405 mu Land as the land use rights are subject to a listing-for-sale process, and if such purchase price is higher than we expected, our business, financial condition, results of operations and prospects could be adversely affected.

Our Audit Committee may find it difficult to reject the acquisition of the 405 mu Land on which we intend to construct our New Facility, even if the purchase price is significantly above our budget, as there may not be suitable alternative land available in the vicinity of our existing shipyard.

As a result of the above, an investment in the Offering Shares should be considered highly speculative in nature. See “Risk Factors — Specific Risks” herein. See also “Risk Factors” herein for a discussion of other factors to be considered in connection with an investment in the Offering Shares.

The pre-ipo investors look rather interesting with Tommie Goh, Gay Chee Cheong, Chew Hua Seng and other prominent pre-ipo investors group and fund in this company, however, the bad IPO timing and big float is a serious concern here even though the grey price is heard to be +10 cents.

I will give it a miss for now since i am just back from vacation and not "in-tune" with the market right now but i give it a 2 Chillis rating due to the high valuation of its listed rival (Yang Zi Jiang) and the good growth prospects for the ship building sector in China.

United Overseas Australia Limited

United Overseas Australia Limited is a property developer and property investment company based predominantly in Kuala Lumpur, Malaysia. (Why is it not called United Overseas Malaysia ?!?! The name is so misleading!).
2m Public Shares at $0.38
53m Placement shares at $0.38
Issue Manager: HL Bank.
I have not done any detailed analysis on this Company as i personally think the property cycle may be toppish. I will avoid this counter.

Mercator Lines (Singapore) Limited

Mercator Lines is a leading Indian-owned international dry bulk shipping company focused on India and other high growth markets such as China.

This IPO was launched while I was on my annual vacation, thus there is no write up on it.

Anyway, it has proven to be a flop as it was priced at $0.76 eventually, versus an initial indicative price range of $0.76 to $0.94. Even then that did not help as it closed at 60cents on the first day of its debut, which is 21% below its IPO price!

What a disappointment and it further worsen the IPO sentiments in Singapore.

Thursday, 6 December 2007

KTL Global Limited

KTL is a supplier of rigging equipment and related services to customers mainly in the offshore Oil & Gas and marine industries.

Public - 2m shares at $0.28
Placement - 38m shares
Manager: Philip Capital

FY07 (30 June 2007):

Revenue : S$41.8m
Net profit: S$10.3m ($6.1m comes from sale of Leashold property)
EPS: Singapore 2.6 cents
Market cap based on IPO price : S$44.8m

After stripping out the one-time gain from sale of leasehold property, the net profit is $4.17m and based on 160m post-ipo shares, EPS is Singapore 2.6 cents. Assuming FY08 grow by 30%, EPS will be Singapore 3.38 cents. Based on IPO price of 28 cents, it is trading at forward PE of 8x. Assuming a PE range of 8-10x, the fair value is between 27 cents to 34 cents. A small upside from IPO price.

I will give it a miss due to the low number of shares for public tranche as well as the fact that it is within its fair value range.

Soon Lian Holdings Limited

Soon Lian Holdings is a specialist supplier of over 1,200 different aluminium alloy products. The products are mainly sold to the marine and precision engineering industries.

Public offer - 1m shares at $0.21
Placement offer - 26m shares at $0.21.
Manager: Philip Capital


1H revenue : S$19.8m
1H net profit: S$2.7m


Revenue: S$31m
Net profit: S$3.3m

Assume FY2007 revenue doubled to S$40m and net profit to S$5.4m, the EPS for 2007 will be around Singapore 5 cents based on post IPO 108m shares. The market cap based on IPO price will be S$22.6m. The Company will be listed on SESDAQ and is a ultra small cap company. The listing PE is around 4.2x. Downside is limited due to the cheap valuation.

I will give it a 1 Chilli rating and give it a miss.

Wednesday, 5 December 2007

First Resources Limited

First Resource is one of the largest private sector of crude palm oil in Indonesia. There are 3 listed peers in Singapore, Golden Agri, Wilmar and Indo-Agri.

Total Offering: Placement 222 million shares and Public 3 million shares at $1.10 per share.
Manager and Underwriter: Citi
Sub-underwriter : UOB Kay Hian

FY 2006:
Revenue : US$ 94.7m
Net profit : US$ 38.8m

FY 2007:
Revenue : US$ 168m (Assume 1H07 x 2)
Net profit : US$ 75m (Assume 1H07 x 2)
EPS (post-IPO) : US 3.2 cents or Singapore 4.64 cents.

Based on IPO price of $1.10, it is priced at a FY07 PE multiple of 23.7x

Peers Valuation:

Golden Agri - Trading at FY06 Historical PE of 13x (use historical as Q307 a bit erratic)
Indo-Agri - Trading at FY07 Est PE of 23.5x
Wilmar - Trading at FY07 Est PE of 24.6x

First Resources is fairly valued based on FY07 projections and the IPO price of $1.10. Any upside is likely to come from the FY08 projections as well as the high interest from Bio-Diesel projects due to the high oil prices.

Heard that the grey is currently up +10c to +15c from the IPO price. If this counter was listed a 2 months back, it would have enjoyed a very decent debut. My view is that this counter will likely debut with a stag of 10% to 20% upside from IPO price. I would give it a 2 Chilli ratings for long term prospects and profitability and the good peer valuation and share price movement will likely lend further support to this counter.

Wednesday, 28 November 2007

Hyflux Water Trust

Hyflux Water Trust is the first pure-play global water business trust to be listed on a securities exchange in Sia that provides investors with an opportunity to invest in water-related infrastructure asset in China, Middle East and North Africa region. Upon listing, it will have 13 plants in China.

Sponsor: Hyflux
Number of Units : 165 million (Out of which 30m for Public, 135m for Placement)
Price per Unit: $0.78
Yield 5.72% for FY 2008 (after Sponsor waived off its rights to the Distributions)
Yield 6.74% for FY 2009

In my personal view, this is one of the smartest strategic move by one of the richest lady in Singapore. Hyflux, with its expertise in Water Treatment, owns many water treatment plants. The setting up of the Trust allows Hyflux to 'cash out' of its fixed assets by selling these assets to the Trust in exchange for Units and enticing investors with the 'yield' carrot. To me, the yield presented in the prospectus is unlikely to be achieved if not for the Sponsor waiving off its rights to the distributions in FY2008 and most likely in FY2009, it will elect to receive its management fees in units in order to meet the yield projections. To me, the entire exercise benefits Hyflux the most as it will allow Hyflux to recycle its capital and cash out on its assets.

The closest peer listed in Singapore is Cityspring but at least the performance fee of Hyflux will not be based on its share price performance. Although i like the business in which it is in, the yield presented in the Prospectus is really too low for me vis-a-vis the risks involved. The "Sponsor" might be a better investment target that the Trust. Anyway, my personal view is not to subscribe to the IPO. If you really need that yield, a property trust might just do the trick and the share price performance of Cityspring post its listing isnt helping either.

Monday, 26 November 2007

Chunghong Holdings Limited

The Company is in the PCBA and OEM business for the Electronics Industry.

Public: 1m shares at $0.365
Placement: 54m shares at $0.365

I will not bother to do any analysis for this Company since the public float is so small (1 m shares only). Look at the current trend where the previous 4 IPOs are below water by around 15%-25%, my view is that you should just avoid this counter. If you are really keen to 'invest' in this IPO, you should be able to get it at better prices post IPO.

Friday, 16 November 2007

Dynamic Colours Limited

(IPO booth still in wraps before the stall opens)

Dynamic Colours is a leading manufacturer of coloured compounded resins & packaging materials serving the IT, electronics and petrochemical industries.

Public - 3.3m shares at $0.215
Placement - 61.2m shares
Manager and Underwriter: UOB Asia Limited

If you look at the results for the last 3 years, the revenue has been increasing but the net profit increased only marginally. Looking at the prospectus and using the net profit before tax figure, the net margin dropped from 8.9% in FY20004 to 4.8% in FY2005 to 4.3% in FY 2006. The 1H07 margins remained at around 4.3%.

1H 07 results:
Sales - US$39.6m
Net profit after tax - US$1.49m

Assume full year 2007 is 1H x 2, the sales will be US$80m and net profit will be US$3m. That will translate into a S$4.2m (assuming US$/S$ is 1.4). Based on post IPO shares of 209.97m, the EPS for FY07 is projected at 2 Singapore cents. At the IPO price of $0.215, the issue is priced at 10.7x FY07 PE. The market cap at IPO price is only S$45.1 million.

This is really a small cap counter in a competitive landscape and facing declining margins and rising resin costs. The only saving grace is that it is a "China" play and priced at close to its NAV of 19.5 cents as of 30 June 2007. Another plus point perhaps is that the Company is backed by private equity funds. The small float of only 64.5m new shares also make it easier for underwriters to help manage the share price, so for goodness sake, dont short this counter on the first day of listing as 66% of the share cap is under moratorium for 6 months! I got this feeling that this company might just surprise on the upside given its small float and cheap pricing that is close to NAV. It will be difficult to get from the IPO public tranche though. (Note: It is cheap pricing, not cheap valuation).

Tuesday, 13 November 2007

Z-Obee Holdings Limited

Public - 5m shares at 34 cents
Placement - 124m shares at 34 cents
Manager / Underwriter - OCBC Bank
Closing date: 19 Nov 2007 12pm.

The Company provides full-set solutions for the handset industry. Let me summarise the results for the financial year ended 31 March 2007:

Sales - US$46.2m (S$66m)
Net profit - US$8.8m (S$12.7m) assume US$/S$ is 1.44
EPS - US 1.77 cents (Singapore 2.55 cents) based on post-ipo no. of shares

Personally i dont like this sector. This sector in China is very competitive and cut throat. The FY2007 results really surprised me in terms of its profitability and 19% net margin. Based on the IPO price of 34 cents, the company is priced at 13x historical PE. The market cap based on the IPO price is around $169.2 million. One of the competitors in the same sector listed on SGX is Long Cheer. Long Cheer is currently trading at 6.13x PER and its net margin is much lower at 7.7%. Long Cheer's market cap is around $226 million. OCBC is one of the pre-ipo investors and they are selling vendors shares at the IPO. Personally, i never like IPO backed by OCBC.

Assuming FY2008, the EPS grow by 50% and EPS is 3.8 Singapore cents. Based on a valuation of 8x-10x PER, the fair value is around 30 cents to 38 cents. In this regard, i think upside is limited post-IPO and i will give this a miss. It will be tough to get from the IPO from the public tranche though.

Monday, 12 November 2007

Lippo-Mapletree Indonesia Retail Trust

Lippo-Mapletree Indonesia Retail Trust ("LMIR") is a retail reit that comprise of retail malls in major cities in Indonesia.

Public offer: 20m Units at $0.80 per unit.
Placement Offer: 625,469,000 Units at $0.80 per unit.

Assuming a FY2008 payout of 5.84 cents (based on its prospectus) and the IPO price of 80 cents, the yield is 7.3%

LMIR is the first indonesia retail reit offering in Singapore. The first Japanese Residential Reit "Saizen" ended more than 10% lower than its IPO on its debut, it will be interesting to see how this Indonesian Retail REIT performed. The other Indonesian-theme REIT is also by the Lippo Group and is known as First REIT but that is in the healthcare sector with higher yields.

What i think are the risks for investing in this REIT (resulting in me giving it a 1 chilli rating):
(1) Retail sector - will tie to the overall economy of Indonesia
(2) Country - High risk premium for Indonesia. Any Riots or Unrest will affect this sector greatly and you never know when the Indonesian govt may suddent change their policies etc.
(3) Forex risk - Any depreciation of Indonesia Rupiah against SG$ will be detrimental to Unit Holders.
(4) Large float - the float is very large and most likely, all the institutions who want to invest in this REIT will likely be satisfied.
(5) Weak IPO sentiments - Sentiments is hit in recent days and the market is currently not favorable to REITs.

Considering the risks above, i am not sure if the yield of 7.3% for 2008 will attract enough investors as any increase in price post IPO will most likely result in investors cashing out of LMIR and reallocating their assets into lower risk assets with better yields. I will skip this REIT since i am personally not a "REIT" person but the fact that Mapletree is in this REIT may provide some support to the share prices.

Sunday, 11 November 2007

China New Town Development Company Limited

(IPO booth at Raffles Place)

China New Town Development Company ("CNT") is a leading new town developer in PRC. They currently have 3 projects in Shanghai, Wuxi and Shenyang.

Public : 12m shares at $0.83
Placement: 388m shares at $0.83
Manager: Citigroup Global Markets Singapore
Underwriters: Deutsche Bank, DBS Bank

The proceeds will be used to develop the new towns. The 12m float is quite big for the public tranche, as such it will be 'relatively easier' to get this IPO from the ATM than usual. I cannot recall any similar companies listed on the SGX except that Yanlord (a large property developer in China) may be used as a peer comparison. If Yanlord's share price post listing is any indication for China New Town, then it will only be good news to CNT's shareholders.

On one hand, i didnt have much time to evaluate this company as i was travelling last week, on the other hand, i really dont know how to value this company with such unique operations either. I guess the comforting fact to IPO punters is that when i asked for more placement shares (than what was allocated to me), my request was rejected due to the overwhelming demand.

It is really a tough call right now to say if this IPO is worth a "stag". While i am bullish on the long term view of this Company in China (as a New Town developer in a big populated country), there are other concerns as well such as the big share float, whether they will receive new mandates for townships, short term corrective measures taken by the Chinese Government to cool the hot property sector etc.

Conclusion: If we can use Yanlord's post IPO share price as any indication, then there could be longer term upside to CNT. Subscribers to this company's IPO should hold a longer term view and IPO punters should perhaps give it a miss. My gut feel is that it will open above 83 cents though.

Tuesday, 6 November 2007

Sinotel Technologies Ltd

I am travelling on business this week and has no chance to visit the IPO booth in Raffles Place (if there is one) to take the pictures. Sorry....if any kind soul can visit the IPO booth at Raffles Place and take a picture for me, do email the picture to me. hahaha.

Anyway, i have no time to do the analysis in detailed for Sinotel Technologies and here is my take after taking a very quick glance at the prospectus and my experience with such companies.

Public Shares: 3m shares at $0.51
Placement shares: 67m shares
Issue Manager: SAC Capital
Underwriter: UOB Kay Hian

The Company is in the business of providing wireless network solutions, handset distribution and mobile entertainment enabler. Personally my experience with such companies, especially those providing 3G network solutions is that:

(1) Revenue can be very volatile and lumpy because it depends on the capital expenditure of China telecommunications giants;

(2) 3G issuance. I have been hearing that the Chinese Govt will issue 3G license for the last 2 years because of the 2008 Olympics and as of today, it is still uncertain as to when the Chinese govt will issue the 3G licences and 2008 Olympics is just less than a year away. If the 3G licenses are not issued, the telcos are unwilling to spend more $ to implement the network.

(3) Margins are dropping. Due to centralized bidding process by China Mobile and China Unicom, the margins are getting thinner. 3G networks solutions providers in China inlcudes listed companies like Hua Wei, Comba (Hong Kong) and China Grentech (NASDAQ). These rivals are much bigger than Sinotel.

Revenue - RMB 219m
Net profit - RMB 57.2m

I would caution about my projections as revenue and earnings can be rather volatile and difficult to predict for this industry. For convenience, i will project a 30% growth over FY 06 top and bottom line. My work would have been much easier if the prospectus include 1H07 results instead of 1Q07.

FY07 - Projections
Revenue - RMB 285m (or S$57m)
Net profit - RMB 75m ($15m)
No. of shares - 280m
EPS in Singapore cents for FY07 = 5.36 cents.

Assuming a PER of 10x-12x and the FY07 EPS, the fair value will be between 54 cents to 64 cents, representing some upside to the IPO price. The fair value will be higher if the following assumptions are true:

(1) We have more clarity on FY07 figures and we are able to use FY08 EPS projections

(2) 3G licenses are issued in late 2007 and early 2008. The issuance of 3G prior to 2008 Olympics will be a catalyst to this company.

(3) My market vibes report that besides Tan Kim Seng, ex-founder of KS Energy, the shares are placed out to "strong hands". We shall see if this 'market vibe' is true.

Happy balloting but it will be tough to get the shares from the public tranche.

Saturday, 3 November 2007

Changtian Plastic & Chemical Limited

(IPO booth at Raffles Place. A very crowded week at Raffles Place for IPO booths)

Changtian Plastic & Chemical Limited ("Changtian") is engaged in manufacture and sale of adhesive tapes, release papers, BOPA films.

Public - 5m shares at $0.47. closing on 6 Nov
Placement - 210m shares
Manager - Boulton Capital
Underwriter - UOB Kay Hian

FY 06:
Sales: $107.59m
Net profit: $29.676m
Net margin: 27.6%

FY07: Projections
Sales: $140m
Net profit: $40m

No. of shares = 660m. EPS 2007 projection = 6.06 cents
EPS 2008 projections x 30% growth = 7.88 cents

Personally i dont really like this company. It reminded me of Luxking and CHT. Luxing has a lousy net margin of 5% and is trading at around 5-6x PE and is still 25% below its IPO price. CHT is only 12% above its IPO price , trading at 5-6x PE with net margins around 20%. While at market cap of > S$300m verus $141m for CHT and $38m for Luxking.

If i used 2008F EPS projections and a slightly higher-than-peer valuation band of 8x-10x PER due to its better margins, the fair value range is 63 cents to 78 cents, thus giving this stock a more than 30% upside from its IPO price.

Although it will be tough to get the IPO shares from the public tranche, I will sell on the first day if i get this since i dont really like the industry. Good luck!

Thursday, 1 November 2007

Cacola Furniture International Limited

(IPO booth at Raffles Place. Unlike China Hongcheng, it never showcase its products)

Cacola Furniture International Limited ("Cacola") designs, manufactures and distributes a wide range of modern- style home and office furniture in the PRC. This is an interesting sector to be in right now in China as the 'middle-class' in China start to get more affluent and they want to invest in good apartments and decorate their homes with nice furnitures.

Public offer: 4.5m shares at $0.32
Placement: 114.5m shares
Manager: Boulton Capital Asia
Underwriter and Placement: CIMB

The Company has been growing at >25% annually in top and bottom line for the last 3 years. Based on the Q107 growth over Q106, it is likely that the revenue for this year will likely cross the S$100m and net profit will cross the $20m mark. My forecast is that sales for 2007 will range between $107m to $120m and net profit will range between $18m to $22m (may surprise on the upside). Based on the post-IPO share cap of 345m shares, the EPS will range from 5.2 cents to 6.4 cents.

The peers listed in Singapore includes: HTL (not exactly similar space) trading at 6x historical, Man Wah (more similar) trading at 13x historical and Koda (not exactly similiar) trading at 10x historical. I will give it a fair value of 8x-10x PE conservatively for China Play and that will give Cacola a fair value of between 42 cents to 64 cents based on 2007 EPS estimates. At 42 cents, it represents a upside which is more than 30% from the IPO price.

What may possibly derail the "IPO stag" will be:
(1) Large placement float of 114.5m shares
(2) Lack of support from CIMB and investors post listing (see share price of China Hongcheng today which is below its IPO price)
(3) Sentiments turning sour on the stock market.

Wednesday, 31 October 2007

Saizen REIT

(Japanese-tori decorated IPO booth at Raffles Place)

Saizen REIT is Singapore's first Japanese residential reit to be listed on SGX. Saizen is offering 196,740,000 Units at S$1 each. The IPO will close on Nov 5 at 8 am.

The 6.5% yield is a bit misleading as it is based from the period from 5 Nov 2007 to 30 June 2008. For the full year from 1 July 2008 to 30 June 2009, the yield is expected to be 5.65%. Investors who want exposure in this REIT should consider the following:
(1) Residental property outlook for the Japan market (an improving market will increase the value of the properties held by the Trust);
(2) The JPY/SGD forex rate. A weak Yen against S$ will mean a lower rental income in S$.
(3) A rise in lending rate in Japan market may increase the cost of borrowing. As it is, the borrowing cost of Yen is low, so any increase in borrowing rate will increase the cost of financing.

You will need to consider if this asset class is suitable to you. For those who punt IPOs, it is likely to be a stag on the first day due to the following:

- Good underwriters in Morgan Stanley
- Stablisation process by Manager
- Yield compression to 5% may provide some upside to IPO price of between $1.10 to $1.30

Tuesday, 30 October 2007

Marco Polo Marine Ltd

(Marco Polo IPO booth at Raffles Place, pardon my poor image quality)

Marco Polo is primarily in the ship chartering and shipyard business. The company currently has 23 vessels for its ship chartering business. The shipyard business is located in Batam, Indonesia and it has 11 vessels under construction. The shipyard is in the process of expanding and is expected to be one of the larger shipyard in Batam when the expansion is completed.
Public - 3.8m shares at $0.28
Placement - 49.75m shares

Although this company is heading for SESDAQ, at least the prospectus provides financial performance for the first half of 2007. Revenue for 2006 is $15.9m and net profit is $5.4m. (Net margin is 34%). Revenue for 1H 07 is 200% better than 1H 06 and the first half revenue has exceeded the entire 2006 revenue. Net profit for 1H07 is also 264% better than 1H06, showing an improvement in net margin. Assuming 1H07 is a strong indication for 2007, the net profit for 2007 will likely hit between $12.2 to $15.2m. Based on the post-IPO share cap of 267.75m shares, the EPS for 2007 will likely be between 4.5 cents to 5.7 cents. Assume a PER of 10x, the fair value will be 45 cents to 57 cents and that represents a significant upside of >60% from the IPO price.

Downside will be that contracts are in US$ while costs are in S$ or IDR and what if the company also engage in 'currency hedging'. ?!?

Conclusion - just hoot and hope you get it.

Monday, 29 October 2007

ARA Asset Management Limited

(IPO booth at Raffles Place on a gloomy afternoon)

This is one of the more interesting IPO that comes to the market. If you are familiar with REITs as an investment asset class, this is one level higher. This IPO is about the Fund Manager that manages the REITs. The 'revenue' for the Fund Manager is mainly derived from the management fees for managing the REITS and private funds under its care as well as performance fees for the private funds. The listed REITs under its care are Fortune REIT, Suntec REIT, Properity REIT and AmFIRST REIT. There are a few private funds but the major private fund will be ARA Asia Dragon Fund with a targeted fund size of US$1.3 billion by end of 2007. The ARA Asia Dragon Fund has a life span of 7 years and will contribute positive to ARA till 2014. The Asset Under Management will increase with the final closing of ARA Asia Dragon Fund.

Although there is no guarantee of dividends for this Company (which doesnt make sense anyway since dividends are not tax-free), you can literally participate in the growth of the REIT sector by becoming a shareholder of the REIT Fund Manager. The endorsement by Cheung Kong and corner stone investors such as Fidelity Hong Kong, Mecury and Merill Lynch also help ensure this is a hot issue although i must admit that this counter is not 'cheap' based on the IPO price and 2007/08 earnings. Anyway, the Founder and CEO, John Lim, is going to be a very rich man after this IPO! (easily worth > S$200m)

Placement - 181.876m
Public - 15m
"Friends & Family" - 8.3m

The chances of getting 1 or 2 lots from the public tranche is high . Good luck. Vested.

On the downside, there are some issues which you may need to consider for investing in a Property Fund Manager:
(1) Depreciating US$/S$ if management fees are mainly in US$
(2) Potential conflict of interest between the funds managed by the Fund Manager that may result in lawsuits.

Tuesday, 23 October 2007

Rokko Holdings Limited

This is a 'small float' company with only 30m shares (28m placement and 2m public). It will be extremely difficult to get the shares from the public offering. Due to the small float, it is likely to be a stag on the first day but may dribble lower once investors forget about this counter. In addition, it is also in the tech sector which in my view, is not very 'exciting'. Although it is likely to be a 'stag' for IPO punters, i think investors can give this counter a miss for the following reasons:

(1) Difficult to get at the IPO

(2) Unattractive sector as it is very dependent on the semiconductor industry which is very volatile and cyclical.

(3) Fair value is only a slight premium to the IPO price.

Wednesday, 10 October 2007

China Oilfield Technology

(The IPO is one of the biggest i have seen in recent times, spanning a wide area with 'hotly' dressed ladies distributing prospectus at Raffles Place)...

China Oilfield Technology Services Group Limited is a major "one-stop" customised solutions provider of integrated tertiary oil recovery equipment and product in the Daqing oilfield region of the PRC. Its closest competitor that is listed here is Sky Petrol.

I will give 3 chillis rating to China Oilfield for the following reasons:

1. HL bank is a reputable manager. All its previous mandates has done pretty well post listing and i believe this will be no exception.

2. It is in the oil and gas sector and with oil prices hovering a record prices, this sector is still sizzling hot.

3. It is another "China" story. We cannot seem to get enough of Chinese stocks do we?

I will not attempt to give it a fair value, just HOOT at the ATM and see if your lucky stars shine on you... Good Luck!

Tuesday, 18 September 2007

Fuxing China Group Limited

(IPO booth at Raffles Place...)

Fuxing China is a manufacturer of zipper slider and zipper chains in the PRC and the products are sold mainly to local manufacturers of apparel and footwear products, camping equipment, bags etc. It is one of the few vertifcally integrated players in the PRC zipper industry and has a diversifed customer base of over 900 customers. The prospectus is here.

It is the second zipper company to list here after CMZ. The details are:

Public offer: 5m shares
Placement shares: 170m shares.
Price: $0.46
Issue Manager: SAC Capital
Underwriter and Placement Agent: UOB Kay Hian
Closing Date: 20 Sep 2007

Sales for 2006 - RMB 716.412m
Net profit for 2006 - RMB 155.609m
EPS (based on post IPO shares) - RMB 20.1 cents
EPS (based on SGD/RMB 0.2) - Singapore 4.02 cents

The shares are priced at 11.44x historical FY2006 PE.

Sales for Q1 2007 increased by 22% while net profit for the same quarter increased by 130%.
Assuming sales for FY 2007 increased by 25% and net margin of 22% is achieved, the net profit and EPS for FY 2007 will be RMB 197.013m and RMB 25.4 cents or Singapore 5.08 cents. That will priced Fuxing at a forward PE of 9x.

Assume EPS grow by another 25% in FY2008, EPS for FY2008 willl be 6.35 Singapore cents. Currently CMZ is trading at low PE multiples of 7-10x but since Fuxing is a fundamentally better than CMZ , it deserves a better premium over CMZ. I will give it a fair value of 8-10x FY2008F EPS and based on that valuation, the implied fair value for Fuxing will between 50 cents to 63 cents. A stag to the IPO price and another hit and run IPO counter. 2 Chillis rating.

Thursday, 13 September 2007


(IPO booth at Raffles Place)

It has been such a long time! Parkway Life REIT was last listed on 23 August and the next IPO will only list on 26 September. Well, at least it is a good sign and indication that the IPO market could be reviving and thankfully they send a more decent looking one to test the market. I will come up with a more detailed analysis over the next few days (fingers getting too rusty already from the lack of writing). Check back here again for a more detailed update and the 'fair value'.

Just by looking at the industry and the pictures on the prospectus, i would give it an interim 'stag and 2 chillis rating'.

Public shares - 5m
Placement shares - 155.4m
Price - $0.38
Managers - Jointly by SBI E2 Capital and CIMB

The Company is one of the largest producers and suppliers of downstream petrochemical products and are engaged in the fractionation of raw LPG for the production and sale of propylene, polypropylene and LPG.

The profits for Sinostar ramped up spectacularly in FY 2006 where net income is S$19.321m on sales of S$199m. It is a pity that there is no 1H2007 figures in the prospectus. Sales and profits are likley to exceed 2006 figures. Assuming a 30% increase in net profit in FY 2007 and a 30% increase in net profit in FY 2008, the net income will be $32.6m. Based on the post capital shares of 640m shares, the EPS will be 5.1 cents. Based on a fair market PE multiple of 10x-15x, our fair value is approximately $0.51 to $0.76. Looks like a stag to me.

Good night.

Friday, 31 August 2007

Rough Month for IPOs as market turns turbulent

Here is an article found in the Straits Times on 31 Aug 2007. - Rough month for IPOs as market turns turbulent

THE turmoil engulfing the stock market has been dealing a huge blow to the once-thriving initial public offering (IPO) sector. The Straits Times THE turmoil engulfing the stock market has been dealing a huge blow to the once-thriving initial public offering (IPO) sector.

Investors who have been reaping windfalls from IPOs now have cold feet amid a hair-raising investment climate and are instead seeking safety in blue chips. Only one of the nine firms that listed on the Singapore Exchange this month - Ascendas India Trust - is still trading above its issue price. The rest have fallen between 6.25 per cent and 33 per cent below their issue prices.
This is in stark contrast to the first seven months of the year, when new listings regularly traded at a hefty premium over their IPO prices.

Dealers expect the flow of IPOs to peter out over the next two months. Only two preliminary IPO prospectuses have been posted on the Monetary Authority of Singapore's Opera website, while two have already been withdrawn. Companies are likely to delay listing because liquidity is drying up as the number of investors willing to take up placement shares dwindles.

'Some investors have become so used to the idea of getting a regular windfall from IPOs that they have forgotten that there may be a risk involved. The moment they lose some money, they also lose interest,' a dealer said.

The local bourse has been on a roller-coaster ride, as the crisis in the United States' mortgage sector continues to plague global financial markets. Despite the souring appetite for risk, a Singapore merchant banker noted that some firms had gone ahead with their IPOs here, as the accounts presented on their prospectuses 'might have gone stale otherwise'.

'By failing to hold back, these firms are taking a risk that their IPOs will be poorly received by the investing public, which is unnerved by events on Wall Street,' he said. There has also been a flight to quality, as investors switched out of riskier stocks into blue chips, which seem to be weathering the wild market swings better.

Phillip Securities managing director Loh Hoon Sun said: 'Most new listings are fairly small and do not attract an institutional crowd. So, it is not surprising to find retail investors losing interest in these companies when their prices fell.'

Bigger IPOs have generally fared better of late. Ascendas India Trust, which has a market value of $1.1 billion, was still up 18.6 per cent over its IPO price of $1.18 when it closed at $1.40 yesterday. Parkway Life Reit, with a market capitalisation of $721 million, was down just 6.25 per cent from its $1.28 issue price. It closed at $1.20 yesterday. But textile maker China Hongcheng has fallen 33 per cent to 33.5 cents from its 50 cent debut on Aug 8. Its market value is only $89.8 million. Another smallish IPO, Sunmart Holdings, which makes spray products and has a market value of $70.4 million, fared almost as badly. It has fallen 30 per cent from its 25 cent debut on Aug 15 to 17.5 cents. Some dealers do not expect IPOs to make a speedy comeback, given uncertainties in the market .

'There are already some cheap bargains available, as some stocks have fallen 50 per cent to 60 per cent from their peaks. Why should anyone bother about IPOs?' one dealer said.

Upcoming IPOs? Any takers?

Friday, 24 August 2007

Parkway REIT debuts below IPO price

(Source: Today Newspaper dated 24 Aug 2007)

I believed those who received the shares through balloting must be wondering if they are 'lucky' to get it because they could have bought the shares at a cheaper price from the open market on its debut. If a 'stable and bluechip' REIT also opens below the debut price, i doubt underwriters will dare to bring any BIG float ipo to the market in the short term. More likely smallish IPOs will be used to test the market sentiment first as it is easier to place out and 'control' the smaller float.
I guess i can take a 'prolonged' holiday in the meantime...

Monday, 20 August 2007

Is this the start of the bear market?

I believe all the investors would want to know if this severe correction is the beginning of the bear market and whether the current rebound is a technical rebound or a resumption of the uptrend. 32 of you participated in this poll. The results is still slightly bullish bias with 37% on the bullish side and 28% on the bearish side. The remaining 34% of you are 'unsure' and feel that it could go either way depending on how the fall out of the US sub-prime market pans out.

Let's take a quick look at the 'health' of the STI by looking at the technical picture. The 50-day moving average is beginning to turn downwards and the 200-day moving average has also been breached. It manage to stage a strong rebound today and in my view, STI will need to regain the 3,500 level and maintain above that level to 'overcome' the bearishness. Stock market is a discount mechanism and trade 6 to 12 months ahead of the cycle so if STI cannot move above the 3,500 level and the 3,000 support level gives way, then this could be the start of the bear market. On the other hand, if STI can move above 3,500, it will likely mean the resumption of the uptrend.

Thursday, 16 August 2007

The fall of the Asia Pacific bulls

(source: Bloomberg)

The market in Asia Pacific went into a free fall today after US market closed in the red again for the 5th consecutive days. Currently i am running a poll on whether this correction is the beginning of the Bear Market, do drop by the blog and cast your vote if you have not already done so.
The bull has really fallen hard this time round and here is a little video to perk you up if you still have positions in the market.

Wednesday, 15 August 2007

Performance Analysis


Let's take a quick look at the performance of IPOs so far and you can see that the most recent IPO listings have all gone below water. The IPO window may have closed now for lousy companies that try to be passed off as gems. Investors will be very discerning since sentiments has been rattled quite badly in recent weeks. It is amazing that Sunmart still opened and closed above its IPO price. I must say the 'support' have been very strong from the underwriters and placement agents under such bearish mood today.


The following is a news article that appear on the Business Times today entitled "High IPO premium may take a breather". I 'copy & paste' the story here in case the link is gone.
After blistering year, market may get picky over who it rewards

(SINGAPORE) With first-day closing premiums for initial public offerings (IPOs) regularly shooting for the moon, it has been a great 2007 for local IPO investors so far. But market players warn that the recent US sub-prime fallout means it is now less likely that prices will surge on the first day of trading.

The local IPO market has roared this year, with 37 listings of companies, real estate investment trusts (Reits) or business trusts raising over $4.7 billion. Strikingly, 19 - or more than half of these - saw first-day closing prices of 50 per cent or greater than their issue price, compared to just 14 out of 61 IPOs for all of last year. And twelve out of the 19 saw prices double or more on the first trading day, compared to just three listings in 2006 that achieved this milestone. But a whiff of caution and uncertainty could now settle over the market.
Concerns over the US market for collateralised debt obligations (CDOs), which recently led French bank BNP Paribas to freeze US$2 billion worth of funds over difficulty in calculating their value, have led to rising interests rates and drying up of liquidity in other markets.
Banks are generally facing difficulty in placing shares to institutions or marketing to retailers, especially for issues with weaker fundamentals, one market source said. 'Seeing the share price surge on the first day of trading is not a sure thing any more.'

Patrick Lee, head of UBS investment banking for Singapore and Malaysia, added: 'Placements will be more challenging in this environment. The more risky deals will be more difficult to push through. Investors are more focused now on seeing how markets trade and in managing their portfolios.' He said there was still anxiety over credit markets and the sub-prime fallout. 'The problem is that people don't know how widespread the contagion is. Once they do, the market will normalise,' said Mr Lee. But deals are still going through, he added, pointing out that Parkway Life Reit, which launched its IPO last week, was 'priced very successfully' near the top of the range, with the institutional tranche 14-15 times subscribed. 'What helped is that Parkway is a good name and the Reit space in Singapore is well regarded,' said Mr Lee.
Other sources said the current market sentiment will have more impact on yield-based instruments than pure equity plays. 'CDOs and Reits are all part of yield-based instruments. So when there is a default in one category of these, it will typically cause a re-pricing of risk premiums. For pure equity plays, equity pricing may be affected, but it is unlikely that you will see drastic actions such as a pullout of the IPO,' the source said. Some investors may point to Arcapita, the Bahrain-based bank that last week called off the planned listing of a US$300 million investment trust in Singapore. But sources told BT that Arcapita withdrew its IPO because private investors looking to buy its wind farm and water utility assets at higher valuations had approached the bank directly even before the recent market downturn.

Otherwise, the IPO pipeline remains robust. 'The US sub-prime mortgage and CDO situation has not affected our listing pipeline', Lawrence Wong, head of listings at the Singapore Exchange (SGX), told BT. 'We continue to see a healthy pipeline of mandates and interest shown by investment banks and intermediaries on a listing on SGX,' he said.
At DBS - one of the underwriters for Arcapita, along with Morgan Stanley - the bank's head of equity capital markets, Kan Shik Lum, says Asian economies are still robust and the IPO pipeline in Singapore and Hong Kong is going strong.

Though the CDO woes have resulted in the current market volatility and undermined investor confidence worldwide, IPO candidates with strong fundamentals can expect to launch their deals on time and even price their issues aggressively, he said. 'But the chances of some issuers delaying or aborting their fund-raising exercises cannot be discounted,' Mr Kan added.

UBS's Mr Lee said the bank expects markets to remain choppy for the immediate future. 'Although we will see less issuances, there will be a larger proportion of top-quality names because they can still get deals accepted. 'There is still a lot of liquidity and interest in Asia. You will see people coming back to the market, because Asian companies are still doing well,' he said.

Tuesday, 14 August 2007

When do I usually sell my IPO shares

Here is the poll results for the timing in which visitors to this blog sell their IPO shares. 45% of those polled sell their IPO shares on the first day of trading (if it is above water) and i believe the mentality is somewhat like buying 4-D or Toto with $2 and the sudden 'wealth' seemed too good to be true. :)

The fact that the prices of most IPO shares dropped after the first day seemed to reinforce the belief to 'take the money while it is still there'.

34% of those polled wished they have better luck in getting the IPO shares. I have previously shared some tips on how to increase your chances to get the public IPO shares as well as how to lay your hands on the IPO placement shares. I hope these little tips will help you in one way or another.

Happy punting.

Sunday, 12 August 2007

Parkway Life REIT

Parkway Life REIT is established by Parkway Holdings to invest primarily in income-producing real estate and/or real-estate related assets in the Asia Pacific region that are used primarily for healthcare and/or healthcare related purposes. The initial portfolio includes Mount Elizabeth Hospital, Gleneagles Hospital and Eastshore Hospital. The prospectus is here.

Offering: 288,865,000 units at $1.28 per unit. (subject to overallotment).
Public offer closing date: 13 August 2007 12 pm
Listing date: 23 August 2007 2pm

This is the 2nd "healthcare" reit after First Reit. Although the yield is lower than First Reit, it can be considered as a better quality Reit when compared to First Reit as it has 3 well-known hospitals that are located in Singapore (no political or forex risk) and is backed by a reputable sponsor (where Singapore is trying to be a medical hub). Unfortunately the yields from Parkway REIT is not 'spectacular' where it offers 4.74% in 2007, 4.88% in 2008 and 5% in 2009. It could, however, provide an alternative asset class to investors who wants to diversify their exposure from other types of property REITs.

Personally i believe Parkway REIT will be well received by the investors and assuming a yield compression to 4% on blended 2007/2008 yields, the fair value should be between $1.50 to $1.60 and that represent some 10-20% upside from its IPO price. In times of uncertainty, defensive stocks like Parkway REIT should still be well -received by the investing public, especially one from a reputable Sponsor with good properties.

Uni-Asia Finance Corporation

(IPO booth at Raffles Place... not the right timing to get prospectus i guess)

The Company is an Asian-based structure finance arrangement and alternative assets investment firm. The prospectus is here.

Public Offer: 3.3 million shares at $0.55 each
Placement Offer: 62.1 million shares
Manager: DBS
Closing Date: 15 Aug 2007

This IPO is priced very 'cheaply' with a Post-IPO NAV of 51.7 cents versus its IPO price of 55 cents. It is also priced at a historical 7.6x PE based on post-IPO shares of 240.4m shares and FY06 EPS. I believed this IPO will be undersubcribed if it is not priced so cheaply!

Despite being vested from the IPO placement tranche, i would advise investors to avoid this IPO for the following reasons:
  1. Companies in Structure Finance business has not performed well post-ipo. Without digging deeper into the amount of dividends paid since listing, as of 10 Aug 2007, Babcock & Brown (structured finance) is still 13% below its IPO price.

  2. Companies in "Shipping Trust" business has not performed well post-ipo as well. First Ship Lease Trust is still 7% below IPO.

  3. The business is priced in US$ and I believed US$ will continue to weaken against S$.

  4. Sentiments towards IPO has been very weak due to the recent market turmoil and the premium above its IPO price for recent listing is less than 10%.

  5. ETLA closed below its IPO price, reflecting the weak market sentiments.
While the IPO is cheap, if you are looking for a significant 'stag', I dont think you can find in Uni-Asia. My recommendation is to avoid this company if your intention is to 'punt' the IPO. Put your IPO application fee of S$2 to better use elsewhere.

Thursday, 9 August 2007

Happy Birthday Singapore!

(view from an office building at Raffles Place)

Happy 42nd Birthday Singapore! Singapore is indeed a City of Possibilities. Here is a National Day theme song for you. "There's no place I'd rather be..."

Wednesday, 8 August 2007

Investing in IPOs

Here is lesson from on how to invest in IPO. In US, they have cited the example of Microsoft. Frankly i too, wish i have the foresight to invest in Raffles Education, Ezra, Swiber etc since their IPO.

But the reality is, for every 1 good IPO, there are 9 other lousy ones. How many of us really have the foresight (to pick the right company) and the patience to hold the IPOs for 10, 20 and even 30 years?! and looking at the latest poll results (still in progress) where 45% of you said you will sell the IPO on the first day, no wonder you and i are still punting IPOs and not investing in them. Perhaps i should use change the title of my Blog to Punting in IPOs and sign off my postings with Happy Punting. :)

Tuesday, 7 August 2007

Am I lucky or am I not lucky?

The deteriorating stock market claimed 'another victim' today when MAP technology closes below its IPO price. (This will somewhat affect the sentiments on ETLA negatively?) In addition, the 'price premium' over the IPO price has also been decreasing steadily and the premium is now 10% to 20% on average. For the first time in many months, i actually wondered if getting allocated for IPO shares is a good thing under current bearish mood.
I am vested in both China Hongcheng and ETLA. A 10% to 20% premium over its IPO price will mean an opening range of 55 cents to 60 cents for China Hongcheng and 52 cents to 56 cents for ETLA. Good luck.

Monday, 6 August 2007

Sunmart Holdings Limited

(IPO booth in Raffles Place, why is everyone turning their backs to me? A sign on how the share price will perform? :P)

Sunmart Holdings Limited manufacture and sell a wide range of spray products comprising primarily spray pumps, aluminimum cans and plastic bottles, which are used in the packaging of fast-moving consumer goods such as hair products, cosmetics, perfume, deodorant and detergentl pharmaceutical products such as disinfectants and antiseptic; and health-supplements. The prospectus is here.

Invitation for 102,000,000 New Shares comprising:
Public offer: 5,100,000 shares at $0.25
Placement offer: 96,900,000 shares
Manager: Mitsubishi UFJ Securities
Underwriter and Placement Agent: SBI E2-Capital
Closing Date: 13 August 2007 12pm

Sunmart has 402,000,000 shares post-ipo and based on the IPO price of 25cents, the market cap is around S100.5 million. For the FY2006, revenue is S$ 47.15m, net profit after tax is S$ 9.56m and EPS based on post-ipo shares is Singapore 2.38 cents. Net margins have been increasing from 8% in FY2004 to 20.3% in FY2006. Assuming a 30% growth in revenue in FY2007, the revenue will be S$ 61.3m and assuming the net margin of 20% is applied, net profit will be S$ 12.2m. Based on post-ipo outstanding shares, EPS for FY2007 will be Singapore 3.03 cents. Assuming FY08 grow by another 30%, EPS for FY2008 will be Singapore 3.94 cents.

The closest listed peer is Full Apex which makes PET bottles for the softdrink industry. As of 6 Aug, Full Apex is trading 8.53x historical (31 March 2007) and 6.78x forward PE (31 March 2008). While you can argue that the customers and products of Sunmart is more diversified, under current weak market sentiments, the investors may not give this stock much excess premium. At the IPO price of 25 cents, it is priced at 10.5x historical and 8.2x forward. In this regard, the peers valuation does not give much excitment to this counter (unlike the China Sports case).

Assuming i give it the most aggressive valuation of 7-9x FY08 PE, the fair value range will be between 27 cents to 35 cents. Under current weak sentiments, I will decide whether to apply for this IPO closer to the application date (see the performance of China Hong Cheng and ETLA first). Check back this blog again nearer to the IPO closing date :) I will give it a 2 Chillis for now.

How to lay your hands on the placement shares?

I have shared previously on some "tips" to increase your chances of getting IPO shares from the public tranche. I think many of you are still frustrated by the low probability of getting IPO shares from the public tranche (looking at the current poll results so far).

Today I will share with you some tips on how to increase your chances of getting your hands on the placement tranche. Before we discuss the various 'tips', we must first understand the view point of the placement agent and underwriter.

Imagine you are acting as a placement agent for an IPO and you want to ensure that your IPO is a success, what are the criteria you would set for the investors you place those shares to? Would you want to place your shares to investors who will sell on the first day of trading or would you prefer to place out the shares to reputable investors who will boost the profile and awareness of your IPO? Well, here are some tips that may just help you get some placement shares that you dream of.

Tip 1: Change your name to Mr. Temasek

If your name is Temasek, placement agents will be begging you to take their IPO shares so that they can put your name down in the IPO announcement (or 'IPO Tombstone"). Temasek is known to be a longer term investor and by having such an anchor investor in your IPO, it will sure attract the attention of other investors to support your IPO. Similarly, if you belong to the "Elite Investors Group", placement agents will be offering their IPO shares to you on a platter. Elite Investors Group are reputable investors who will raise the profile and value of your IPOs and may even help placement agent to 'support the price' post-IPO. Example of investors who belong in this Elite Group will be investors like Tommie Goh and Gay Chee Cheong (2G Capital), David Loh and Han Seng Juan (Centurion Investment Management), Koh Boon Hwee, Ooi Hong Leong (Chip Lian), Sam Goi (Popian King) and professional funds such as Dubai Investment, Morgan Stanley, BNP, etc. Usually these investors will take up about a huge chuck of the IPO placement shares and so-called "anchor the IPO". The placement agent will be quite confident that the IPO will succeed because of these anchor investors. If you belong to these Elite Group or if your name is Temasek then you dont have to read further.... hahaha :)

Tip 2: Concentrate your trades in a securities firm that do IPOs.

If you dont belong to the Elite Investors Group, then you must try to get yourself in to the remaining 1,000 public sharesholders which they must place the share to in order to fulfil the listing requirement. These investors are usually allocated between 3 to 20 lots each to allow the placement agent to meet the minimum shareholders requirement. My tip to you will be to concentrate your trades in one securities firm. Dont open a trading account with Lim & Tan, go and open a trading account with DBS, Kim Eng, UOBKH, CIMB, Westcomb and even Philips Securities! Concentrate all your trades at one of these brokerage houses so that when you demand placement shares from your broker, you can 'talk louder' and your demand can 'carry more weight' if it is backed by 'paid commissions'.

Tip 3: Get a dealer, not a remisier.

Why do i say that? Dealers usually work for the brokerage firms and they are usually not allowed to handle their personal/relatives' trading accounts. In this regard, there will be 'less hanky panky' as they will have to justify to their superiors on why they allocate the placement shares to you. They also get more IPO placement shares over their remisiers counterpart because the Company will earn a bigger chuck of the commision from dealers. On the other hand, remisiers have more freedom in whom they allocate the placement shares to and sometimes some remisiers may just allocate them to accounts which they have vested interest. It is also true that remisiers will have less access to IPO placement shares versus the dealers.

Tip 4: Join the IPO club if there is one.

IPO club are open to investors who are willing to participate in ALL the IPOs underwritten by the brokerage firm. In this aspect, investors have to accept the IPO allotment regardless of whether it is a good IPO or a bad one and in good times as well as bad times. If your broker offer you the chance to participate in the IPO, grab it. The rationale is that brokerage firm will usually not launch any IPO during bad times because if the shares are not fully subscribed, the brokerage firm will have to 'underwrite' those shares. DBS and UOB have IPO clubs but they may be 'open for enrolment' only during selective period (like beginning of the year) or to selected people (the high net worths or those who trade a lot through the company). Stay long enough with these securities firm and you may be offered some placement shares. In addition, some securities houses offer internet users some placement shares as well. (e.g. DBS and Westcomb).

Tip 5: Tell your broker you are interested in placement shares and tell them way in advance.

By the time you see the IPO for public tranche is launched, it usually means that the placement tranche has been fully subscribed as well. As such, you will have to be more pro-active to check out the MAS Opera website to find out which offers are pending approval and indicate your interest to your broker if their brokerage house is the underwriter or placement agent. Always tell your broker that you are interested in IPO placement shares so that they will not 'forget you'. If you dont ask, how will your broker know? There is a hokkien saying "脸皮厚厚,吃到老老" just ask your broker for the shares. But again, this will tie back to tip 2 again. If you have generated a lot of commissions for your broker, then your chances of getting the placement shares will be higher.

Ok i will just share these 5 tips for you. Hope you will find them useful to help you lay your hands on those placement shares. Looking at the way the market is 'crashing in the US and in Asia', I am not sure if the IPO window may be closing soon. If you are those who have never received calls from your broker, you may soon be asked by your broker whether you want those placement shares?! and during those times, you may not want the placement shares anymore... well, this is the irony of life isn't it? :)

Sunday, 5 August 2007

IPO Performance Analysis


Let us take a quick look at performance of the IPOs covered by this blog since 07-07-07.

After the recent bloodbath early this week, RH Energy, China Sports and Yongxin (rated 3 Chillis) still trade more than 90% above its IPO price. Well done :) Most of the IPOs are currently trading 20% to 60% above its IPO price with only Finance One below water.

As mentioned in my blog, Fair Value can be a very tricky thing and it seemed that after the bloodbath, the shares have actually dropped to my fair value?! Is my fair value then the correct value and earn me the right to boast about them? Of course not but it just happen that most of the stocks are trading within or close to my 'fair value' range right now. My definition of Fair Value is : Whatever the market deemed is the fair value will be the fair value. My fair value is just a guide for me to know when to take profits as market can be overly depressed or overly exhuberant most of the time.

And the top 3 performing IPOs as of 5 Aug 2007 are ......

Friday, 3 August 2007

ETLA Limited

I cannot find the IPO booth at Raffles Place for the last 3 days. Perhaps the Company and its Manager, DBS, doesn't feel the need to do so especially if they have already fully placed out the shares? hmm... let see if having no booth will affect the share price.

ETLA offers contract equipment manufacturing, sheet metal fabrication, and precision machining services. The prospectus is here.

Public offer: 3.8 million shares at 47 cents each
Placement offer: 34.2 million shares
Closing date: 7 Aug 2007
Manager: DBS Bank

Once again, this belong to the tech sector and once again, you know my 'dislike' for tech companies and once again i use a valuation maxtrix PE multiple of 8x-10x. (Two reasons why i dislike tech companies are: (1) they have very low net margins and (2) their products are always subject to price competition). The net profit for 2006 is S$6.86m and assuming a 50% growth (once gain, the CAGR can be misleading as they started from a low base), the 2007 net profit will be around S$10.29 million. Based on the post-ipo no. of shares of 140,691,100, the EPS is around 7.3 cents. In this regard, the fair value range will be between 58 cents to 73 cents.

All the IPOs covered by this Blog (after 07.07.07) is still in the green except for Financial One. I believe this one should open above water as well but i wont be holding on too long to it. (vested).

Thursday, 2 August 2007

Reasons for visiting this Blog

Dear fellow investors,

Thank you for participating in the first poll on why you visit this blog. The results of the first poll is here and 56% (more than half of the 92 participants) chose finding out the fair value as the main reason for visiting this blog. I certainly hope that my blog has helped you in one way or another.

Monday, 30 July 2007

China Hongcheng Holdings Limited

(One of the better decorated IPO booth in Raffles Place)

China Hongcheng Holdings Limited manufactures home textiles. The Company produces cotton yarn and fabric, silk cotton fabric, yarn dyed cotton fabric, high density broad width cotton fabric. The Company also manufactures bed linens for itself and under contract for other companies. The prosectus is here.
Public offer: 3 million shares at 50 cents each
Placement offer: 65 million shares
Closing Date: 6 August 2007
Manager: CIMB

This company is somewhat of a combination of "Friven" + "Foreland Fabritech" + "China Printing & Dyeing". While it has its own manufacturing facilities for farbic, it also produces high end bed linen for local and overseas markets. Sales for 2006 was RMB 430.6m and net profit was RMB 54.9m. Based on post IPO shares of 268m shares, the EPS for FY2006 is around 4.1 Singapore cents. For the 9 months ended 31 March 2007, the revenue was RMB 395.6m and net profit was RMB 64.193m. Basically it showed that company is on track to meet the 2007FY forecast and i project a net profit of around RMB 85m for the year ended 30 June 2007. The EPS for 2007F will be around 6.4 Singapore cents. Assume it grow by another 30% in FY2008, the EPS will be Singapore 8.32 cents.

Foreland is trading at a PE multiple of 14.5x while China Print is only trading at around 7.3x. Assume a forward PE mulitple range from 8x-11x, the fair value range of China Hongcheng is between 66 cents to 92 cents. Happy investing.

Sentiments & IPO

Sentiments in the market place plays a very important role in deciding the number of IPOs being launched. You always see a lot of IPOs when the sentiments is bullish and relatively fewer IPOs being launched when sentiments is weak or bearish.

July 2007 must be one of the 'busiest' month this year for IPO managers and underwriters. It seemed to me that all the companies are rushing to launch its IPO this month as the market was relatively hot (if we exclude the bloodshed last week on 26 and 27 July). At last count, there are 14 IPOs that are launched in this month of July alone verus only 3 IPOs in March 2007 when sentiments was very weak.

Why do sentiments play such an important role in the IPO market? Some of the reasons are as follows:

(1) It is easier for the Company to sell shares in bullish sentiments.

During bullish sentiments, it is much easier for the Company to attract investors. Some less discerning' and short term 'investors' will not care whether the fundamentals of the Company is good or not as long as they know that they can make a quick buck by fliping the shares. These 'investors' will buy the shares purely based on sentiments and many "not-so-sound" companies with no real substance will want to launch their IPO during this period

(2) Company can sell its shares at a higher valuation.

When sentiments are bullish, Companies going for listing will usually be able to list 'at the higher end' of the valuation range (thus receiving more money from selling their shares). Remember how Chemoil 'delayed' its IPO because the owner wasn't happy with the IPO valuation it received?

(3) Company can command a higher market cap post IPO

During bullish sentiments, the share price after listing will usually be much higher than its IPO price, thus creating good sentiment and goodwill among the investors. This willl in return, help to boost the market cap of the company as its share price goes up post IPO. Company with a bigger market cap finds it easier to attract talents as well as fund managers to invest in it. In addition, it is much easier for the Company to do mergers and acquisitions if it has a high market cap.

(4) Managers and Underwriter take less risk.

Manager and underwriters take less risk when sentiments are bullish as all the shares will usually be subscribed and they can earn their fees with little risk of the shares being under subscribed by the market. Thus you can see Managers rushing to launch the IPOs during good times. The Managers and Underwriters want to have the cake and eat it.

Since market sentiments has turned quite 'bearish' over the last 2 trading days, i wonder if there are any chance for the remaining IPOs in July- Yongxin, Dutech and Fujian Zhenyun to go 'underwater' i.e. below its IPO price. What do you think?

Sunday, 29 July 2007

Fujian Zhenyun Plastics Industry

(IPO booth at Raffles Place - Relatively smaller when the booth of Ascendas India REIT is opposite)

Fujian Zhenyun Plastic Industry Co., Ltd is principally engaged in the R&D, design, manufacture and sale of a broad range of plastic pipes and fittings. The prospectis is here.

Public offer: 1.75m shares at 62 cents
Placement offer: 33.25m shares
Closing date: 1 Aug 2007
Manager: Genesis Capital

Sales for 2006 is RMB 393m and net profit is RMB 63m and EPS (based on post-IPO 115m shares) is RMB 0.55 or Singapore 11 cents. The Company has been growing by 30% annually for the last 3 years and assuming this will continue in 2007, the sales for 2007F will be RMB 511m and net profit will be RMB 81.76m and EPS will be 14.2 Singapore cents. Based on the IPO price of 62 cents, it is priced at a forward PE of 4.37x. Sinopipe, the listed peer on SGX, is trading at a PE of around 6x. Assuming a same valuation matrix for Fujian Zhenyun, the fair value will be around 85 cents.

Personally i dont like this investment. I cant see what so exciting about a piping company with low entry barriers. There are better companies around for longer-term investment, this is another sell on first day investment for me.

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