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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.


Anonymous said...

Your analysis is right...
We must wonder how to make money from furniture??

Anonymous said...

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