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Sunday, 27 January 2008

Centraland Limited

(IPO booth at Raffles Place)

The Company is a premium brand property developer in Zhengzhou City, the provincial capital of Henan Province, which is one of the most populated provinces in PRC. It is principally engaged in the development and sale of residential and commercial properties.

5m Offer shares at S$0.50 each by public offer
240m Placement shares at S$0.50 each.
Issue Manager: Boulton Capital Asia Pte Ltd
Underwriter and Placement Agent: UOB Kay Hian
Closing date: 30 January 2008, 12pm.

It is really hard to value this company just using a prospectus without knowing where the land is located and the future income stream that can be derived from those properties. This is really the first BIG CAP listing on SGX in 2008 where the post market capitalisation of Centraland is worth approximately S$922.5 million based on the IPO price of $0.50!

Audited FY 2006:

Revenue : S$55 million
Net income : S$ 10.8 million

1H FY07:

Revenue : S$29.8 million
Net income: S$ 4.6 million
EPS (post-IPO shares) = 0.19 cents

Assume full year FY07 revenue is $60m, net come is $9.2m, EPS is 0.38 cents

SGX listed peers:

Yanlord Land has a current market cap of $4.8b on SGX and is considered one of the top property developer in China with strong foothold in key cities. FY06: Sales $952m, net income $170m, EPS 11.36 cents.

China Yuanbang has a current market cap of $201 million. FYJun 07: Sales S$67m, net income $15.6m, EPS 3.1 cents.

Sunshine Holdings has a market cap of $158m. FY06: Sales $119m, net income $30m, EPS 3.8c
Landbank 840,000 sqm.

My Comments:

If you are looking at historical financial figures, mostly likely you will come to a conclusion that the Company is overvalued. Its Earnings Per Share is nowhere near Yanlord and is not even as good as smaller cap companies like Sunshine and China Yuanbang. So what you are paying for is for the 'landbank' which Centraland is holding. While i know where the Zhengzhou City is located, i have no idea how much the land is worth. All I can rely on is the valuation from independent valuer CB Richard Ellis. In addition, i have no idea about the earnings from the current projects that are coming on-stream either.

Since i dont know much about the Company (even from the prospectus) and looking at the marco fundamentals where the stock market is very volatile and the Chinese government's measures to cool the China property market, my personal view is to avoid this sector for now.

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