Hisaka Holdings Ltd

The Company is issuing 64m new shares at $0.23 and selling 26m vendor shares. The public will get to ballot for 4.5m shares while the rest of the 88.5m shares will be sold via placement. The IPO will close on 6 May at 12pm and the IPO will be launched on 8 May 2008. Based on the IPO price of $0.23 and post shares of 200.6m, the market cap of the Company will be S$46.1 million.

The company is an automation solutions providers in Singapore and specialise in mechanical motion products. The production facilities are located in Singapore Malaysia and China.

Financial Highlights - Revenue in FY2005 was S$33.7m and grew to $56.5m in FY2007. The net profit grew from S$2.4m to $6.0m in the same period. While the growth is somewhat impressive, the net margin is low at 10%.

While this is a small cap company with so-so profit, it is interesting to note that Mr. Cheng Ee Chew is paid more than $500,000 per year while Mr. Cheng Ee Lieng is paid more than $250,000 per year (before performance bonus for FY2008). The both of them accounted for more than 12.5% of the net profit for FY2007 and being a listed company, i think this high% is hardly justifiable. The independent directors will do well to do a thorough benchmark of the executive remuneration against similar companies.

Assuming profit for 2008 grow by 15%, the net earnings will be $6.9m and EPS will be 3.44 cents. Assuming a fair value PE of 6x-8x, the fair value will be between 20.5 cents to 27.5 cents.

Personally i think the Company is a mediocre company and the profit growth is not spectacular. At the IPO price, it is already fairly valued and with the high executive payroll, my suggestion to long term investors is to give this company a miss.