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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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Mencast Holdings Ltd.

Mencast Holdings Ltd is offering 22.5m new shares priced at 28 cents per share of which 1.5m shares will be offer via public and the remaining through a private placement. The Company manufacture and supply sterngear equipment and provide sterngear services for a wide range of commercial vessel-applications.

Revenue increased from S$11.65m in FY05 to S$18.8m in FY07 but net profit improved from S$707k to S$4.8m in FY07 indicating a strong improvement in net margin from 6.1% to 25.5% over the last 3 years.

Based on the IPO price, the market cap is S$41.3m. An ultra small cap company on Catalist. The EPS for FY2007 bsaed on post-invitation shares of 147.5m is 3.27 cents. The Company sold itself at a valuation of S$24m to pre-ipo investors on 30 May 2008 (or 19 cents per share), it is amazing that within a short span of less than one month, it can repackaged itself to sell to the market at 28 cents per share at a significantly higher valuation. The identity of the pre-ipo investor was not disclosed as it holds less than 5% and is not selling any vendor share. Personally, i dont like such 'restructuring' within a short span of time. There are several possible reasons for doing this pre-ipo transaction - (1) Owners want to cash out but didnt want to sell vendor at IPO for fear of depressing the market; (2) Underwriters want to find some strong hands to anchor this IPO but anchor will only come in a lower price as he/she will be subject to 6 months moratorium. (3) Special arrangement with underwriters, etc. I have no idea what the reasons are but certainly never like this kind of 'restructuring' as i am not the one who benefited from it but i would have preferred if the identity of the pre-ipo investor was disclosed. :P

It also seemed amazing to me that the margins can improve so strongly over the last 3 years and personally, I would like to adopt a 'wait-and-see' attitude on the sustainability of this margins in the next few quarters. I would rate this a 1 chilli counter and observe this company for a longer while.
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