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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!

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