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Singapore IPOs: Why I No Longer Cover Every Listing

Some readers may have noticed that I have not been writing about every Singapore IPO since last year. The simple reason is that life has become busier. Between my day job, an increasingly packed travel schedule, family commitments and desire to play more golf, I have become much more selective about how I spend my time.  Writing detailed IPO reviews takes time — reading prospectuses, analysing financials, comparing valuations and understanding the competitive landscape. While I still enjoy investing and writing, I no longer feel the need to cover every IPO that comes to market. Instead, going forward, I will probably focus only on IPOs where I am seriously considering investing my own money or where there is something particularly interesting that is worth discussing. I suspect this will make the blog more useful as well. Rather than writing about every deal, I can spend more time sharing my thoughts on the handful that I believe deserve attention. That bring...
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Wee Hur Holdings Ltd.


(IPO Booth at Raffles Place)

Wee Hur Holdings Ltd specialise in construction projects, ranging from new construction, additions and alterations of existing buildings. Bascially we can use one phrase to describe this company - A "Brave" Construction Firm.

2,091,000 Public Offer shares at $0.25
81,558,000 Placement shares at $0.25
Joint Managers: SBI E2-Capital and Phillip Capital
Closing date: 28 Jan 2008 12pm (they should have chosen 8.08 am as the closing time :P)

Once again, i use the word "brave". I definitely hope they are not trying to be the first IPO to be undersubcribed. Basically i have nothing good to say about this industry, so lets start with what i dont like about this sector/company:

(1) Cyclical industry. The earnings fluctuate with the property cycle. If you remember just a few years back, the construction industry is in the doldrums and all the construction firms almost 'died'. If not for the IR and the current property boom, i believe Wee Hur will not have this 'window' to list.

(2) Limited growth. How exciting can this sector be with competitive landscape and rising construction raw materials.

(3) Owners are selling out. Under such market sentiments, even the owners are cashing out by selling vendor shares. I am really surprised the underwriters agreed to it!

(4) Small market cap. With a market cap of only $80.3m, this is one of the smallest construction firm around when you compare to the likes of Chip Eng Seng, Lian Beng and Koh Bros.

(5) Family Biz. As in most construction firm, it is usually a very family oriented business. This may prevent some 'professionals' from joining the firm.

Fair Value:

Lets take a look at the track record of Wee Hur:
FY2004 Revenue: $48.1m, Net Profit: $1.65m
FY 2005 Revenue: $45.8m, Net Profit: $1.57m
FY 2006 Revenue: $80.6m, Net Profit: $2.757m
1H 2007 Revenue: $45.6m, Net Profit: $5.74m

Assuming EPS for 2007 is 1H07 x 2 = 3.6 cents, based on the IPO price of 25 cents, it is trading at a historical PE of 6.9x, which in my view, is reasonably priced. Assuming a EPS growth of 20% for FY 2008, the EPS will be 4.32 cents. Assuming a PE value of 8x, the 'fair value' will be around 34 cents.
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