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IPO Chilli Ratings

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Food Innovators Holding Limited

Food Innovators Holdings Limited ("FIH" or the "Company") is offering 14m shares at $0.22 each, for which 13m shares will be through placement and the remaining 1m shares via a Public Offer. The IPO will close on 14 Nov at 12 noon and starts trading on 16 Oct 9am.  FIH has two business models - the first is to be a master lease and sublease the space to other tenants and the second is to operate and manage restaurants.  The Company currently has 12 restaurants in Japan, 10 in Singapore and 4 in Malaysia. The market cap based on the IPO price is around $24.9m. Financial Highlights FIH's revenue grew from $37.8m in FY2022 to $43.8m in FY2024. It is quite funny to see that being a master land lease holder has a higher margin than operating the restaurants, once again illustrating the point that it is better to be a landlord to shake leg and collect rent. According to the prospectus, the PER is around 19x. The Company intends to pay 20% of its net profit after tax a
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Li Heng Chemical Fibre Technologies Limited


(IPO booth at Raffles Place - Photo compliments from Fergus)

Li Heng Chemical Fibre ("Li Heng") is offering 400m shares (340m new shares, 60m vendor shares) at $0.80 each. 10m shares will be for the public while 390m shares will be privately placed out. It is amazing that under current sentiments, the vendors are still allowed to cash out at IPO. Closing date is 10 March 08 at 12pm. Market cap is $1.36 billion based on 1.7b shares at IPO price of $0.80. The cost per share to the Pre-IPO investor is around 41.58 cents (versus IPO price of 80 cents).

Li Heng is primarily in the business of manufacturing and selling high-end nylon yarn products in China. The main listed rival on SGX will be China Sky. To get a better feel of Li Heng, let's look at 2006 and 2007 financial results of China Sky:

2007 sales - $449.1m. Net profit - $127.9m. EPS - 16.1 cents
2006 sales - $374.4m. Net profit - $102.8m EPS - 14.3 cents

The financials for Li Heng is as follows:

2006 sales - $338m. Net profit - $95.2m. EPS - 5.6 cents
2007 1H sales - $285.8m. Net profit - $93.7m. EPS - 5.51 cents.

Assuming 2007 full year sales doubled. Sales will be 571.6m and net profit will be $187.4m. The EPS will be 11.02 cents. Based on the IPO price of 80 cents, it is priced at 7.3x 2007 PE. China Sky's share price at the close of March 7 is $1.07, the share price of China Sky is trading at 6.6x 2007 PE.

It appears that China Sky will present a better investment opportunity than Li Heng. My suggestion is to keep your cash at bank and save the IPO application fee of $2. On a longer term basis, assuming a fair value PE of 8-10x, Li Heng's fair value will range from 88 cents to 110 cents.
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