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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.

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