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Thursday, 31 December 2009

Happy New Year

Here is wishing you and your loved ones a healthy, happy and wealthy year ahead.

May the new year continue to bring you joy and happiness and thank you for your support to this blog.


Sunday, 20 December 2009

Hock Lian Seng Holdings Limited

Hock Lian Seng Holdings Limited is issuing 110m New Shares comprising 2.2m Public Offer shares and 107.8m Placement shares at 25 cents each. The market cap is $127.5m.

The Company undertakes civil engineering projects and is a Grade A1 contractor (meaning it can tender for Singapore Public Sector civil engineering construction works of unlimited value.

The Company's revenue grew from $48.5m in FY06 to $194.5m in FY08 and net profit grew from $1m to $15.5m in the same period.  1H09 revenue is $109m (growth of 50%) and net profit also more than doubled to $9.4m. The ability to grow its revenue and profits will depend greatly on its ability to win contracts and "budget" for the projects accurately. Currently our construction sector is in a huge boom due to IR construction, major road projects but as it is, our land size is limited.

The company will be listed on 21 Dec 2009. At the IPO price of 25 cents, the Company is listed at 8.3x 2008 earnings based on fully diluted basis.

Assuming the current year earnings is $24m, the EPS is going to be 4.7 cents, the 2009 PER will be around 5.3x. The listing PE is cheap and on the low side but considering the "civil engineering" sector, a low PE might be warranted to attract potential investors to anchor this IPO.   However, competitors like OKP are trading at much higher premium. The Company intends to distribute 30% of its FY2009 profit as dividend and assuming its profit is 24m, the dividend will be $7.2m and the implied yield is 1.4cents or 5.6% yield. A fairly attractive yield for such a short holding period (assuming it pays out by June 2010).

Downside for this counter should be limited by the low IPO price and attractive yield and investors in OKP might want to consider this alternative if adding on to their existing portfolio or switched to this counter for higher yields (assuming you are able to get it at IPO price).

Wednesday, 16 December 2009

Hafary Holdings Limited

Hafary Holdings was established in 1980 and is a supplier of tiles to customers in the Singapore Market. The Company is offering 32.5m New Shares at $0.20 each for a Catalist listing and market cap is $32.5m post listing.

Personally i don't like the sector in which the Company is in as there are many competitors, low barriers of entry and cyclical in nature.  Revenue has remained stagnant from $29.9m in FY2008 to $30.8m in FY2009.  The net profit has declined from $3.4m to $3.0m.

The historical EPS (assuming service agreement in place and based on enlarged share cap) will be 2.16 cents and that translate into a historical listing PE of 9.3x (not cheap considering the sector it is in).


Hiap Tong Corporation

I had a week long vacation in December and this IPO (and the next) appeared for "completeness" purpose. 

Hiap Tong Corporation Ltd. and its subsidiaries (the “Company”) is a leading provider of hydraulic lifting and haulage services primarily to the marine, petrochemical, and construction industries in Singapore. 

The Group also derives income from the trading of lifting and haulage equipment and from its leasing business in cranes and haulage equipment. The Group’s trading business is undertaken through the trading of new and used cranes from countries such as Japan and Germany and selling the same directly or through brokers to customers in countries and regions such as India, Indonesia, the Middle East and Malaysia.

The Company is offering 38m New Shares at 26c each for a Catalist listing that is sponsored by CIMB. The company somewhat reminds me of Tat Hong listed on SGX. In FY2008, the Company had a revenue of $38.4m and a net profit of $10.2m. First half 2009 revenue is $19.4m and net profit is $7.4m.

NAV per share post IPO is 17.4c. Assuming the service agreement was in place in FY2008, based on the enlarged share cap, the EPS for FY2008 will be 3.98 cents and that translate into a listing PE of 6.5x historical. The market cap post IPO will be $64.5 million.

Assuming the EPS grow by 25% (looking at 1H2009 performance), the EPS will be around 4.975 cents. That translate into a forward PE of 5.2x. The Company appeared to be fairly priced at IPO price. CIMB will have to do more to attract investors to support the share price post listing.

Tuesday, 24 November 2009

Q&M Dental Group (Singapore) Limited

Q&M Dental Group (Singapore) Limited (the "Company" or Q&M) is offering 74.075m shares at 27 Singapore cents. The offer is via placement only and the IPO will close on Nov 24 noon. Post IPO, the market cap is $74m . It is the first Dental pureplay to be listed on the mainboard of SGX and is one of the largest private dental healthcare group in Singapore.

Q&M plans to use close to 90% of IPO proceeds to fund new clinics and acqusitions.  It intends to make its foray into China first tier cities.  Revenue has grown from $24.3m in FY2006 to $29.6m in FY2008 and net profit has grown from $3.6m to $4.4m in the same period.  EPS for FY2008 is 1.6 cents based on the enlarged share cap and that represents 16.8x FY2009 earnings! Post IPO, the Company intends to distribute more than 50% of its net profit as dividend for 2H2009 and full year 2010. Assuming this year EPS is 1.6c (same as FY2008), the dividend payout will be 0.4 cents (2nd half only) and that translate into a yield of 3% (annualised) for FY2009.

The Company intends to expand aggressively ahead using the IPO proceeds and has injected a certain China play into this IPO and i guess that is what makes this IPO more 'interesting' than a pure Singapore dental play. As the IPO valuation is 'not cheap', investors will have to buy into the "story" that Q&M will be able to execute successfully in the fragmented China market. While the high "dividend" payout appears to be generous and attractive, it somewhat contradicts the cashflows needs of an "aggressive expansion plan".

Thursday, 19 November 2009

Capitamalls Asia

CapitaMalls Asia ("CMA") has priced its IPO at S$2.12 per share for a total deal size of S$2.47 billion. The final price was near the mid point during its bookrunning exercise at between $1.98 to $2.39.  The offer will end on Nov 23 at 12pm.

According to the Company, the demand from institutions was strong and the retail tranche was cut back from 12% to 8% of the total deal size but even at 8%, the retail offering of $197m will make it as one of the largest retail offering in Singapore since Singapore Telecom in 1993. 

Investors were "pitched" into buying CMA on the basis of being a consumer play with unique exposure to shopping mallss across Asia, including high growth assets in countries like India and China. If you have seen the advertisements in the papers during the book building period, you would have "bought" into the compelling growth story as well.

According to Finance Asia, at the final price, CMA is valued at 1.55x current book value (expensive!) and it is coming to market at a slight discount to HK-listed Hang Lung Properties, which trades at 1.8x.  However, if the two listed REITS were removed from CMA's portfolio, the other business are priced at 1.8x book! At the time of listing, CMA will have a portfolio of 86 retail properties across 48 cities in 5 Asian countries.  Of the 86 properties, 59 are already completed shopping malls in Singapore, China, Malaysia, Japan and India while the other 27 are at various stages of development. 

Personally, i think that the IPO is over-priced and that SGX is bending backwards to allow the Capitaland to "double dip", i.e. to eat from the honey pot twice.  Why should Capitaland, with no change in its business or operations, be allowed to "hive" off its shopping malls and then 'list its hived off unit" separately, at a premium to the parent company. Basically, it allows Capitaland to "make some money" from the IPO "out of nowhere". From an investors perspective, if you are an investor of Capitaland, CapitaMall Reit or CapitalRChina Reit, there will possibly be many situations where conflicts of interest may arise. Just to give you some examples, if CMA wants to divest a mall in China, should it sell to Capital Retail China REIT or to a third party; or after Capitaland has developed a mall in Singapore, should it sell to CapitaMall or to CMA? In addition, some of the directors of CMA are also the directors of the related listed companies.  After the IPO, Capitaland will hold 70% of CMA.

While positive sentiments from "overwhelming" institutional investors may help to boost its share price on the first few days, i would avoid this IPO for its pricy valuation and limited upside. There are cheaper alternatives around and to pay 1.8x book for the assets might not be an wise one, it is like paying $1.8m for an apartment that is worth only $1m. 

Monday, 16 November 2009

Sino Grandness Food Industry Group Limited

Sino Grandness Food Industry Group Limited is offering 85.52m shares (makes up of 70m new shares and 15.52m vendor shares) at 29 cents each.  2m shares will be offered to public and the rest via placement.  The offer will end on 19 Nov 2009 at 12pm.

The Company is a manufacturer and export-oriented supplier of quality canned fruits and vegetables. 

Revenue increased from RMB 95.824m in FY2006 to RMB 330.268m in FY2008 and net profit grew from RMB 11.018m to RMB 52.72m in the same period.  Based on the enlarged share cap of 245,172,414 shares, the EPS for FY2008 is RMB 21.5 cents or 4.07 Singapore cents. That will translate into a listing PE of 7.12x.  While Q1 financials were provided, it appeared that there are some seasonality in the financials of the Company where Q1 is the "lull" period. The market cap post listing will be S$71.1m 

Looking at the make up of the pre-ipo investors, this company went through 2 rounds where some of the first round pre-ipo investors were "bought out" by the 2nd round pre-ipo investors. The more prominent current pre-ipo investors will be Philip Ventures and Kim Sneg Holdings. The Company also disclosed some litigation issues with Elloitt Advisers in HK for US$300,000 in its prospectus.

Based on current sentiments, I believe that the Company will be worth a stag. I would not speculate on its long term prospects as Q1 results is not very indicative. This will be a sell on first day stock for me for now.

Friday, 13 November 2009

SBI Offshore Limited

Time to do some housekeeping. Sorry i missed this IPO because it is another Catalist listing and via placement only.

SBI Offshore Limited ("SBI") is a Singapore home-grown company supply equipment to shipyards and rig builders in Asia's offshore and marine industry.  The company is placing out 20m shares at 27 cents each and the market cap is $29.88 million and  the company's IPO was priced at 12.08x FY08 earnings

The company generated revenue of $11.72m for FY 2008 and net profit of $2.339m.
The company generated $6.3m revenue and $1.364m net profit for 4 months ending 30 April 2009.  

While the company has done well for the first 4 months, I  feel the company's revenue is still too low and need to be boosted further and  you can understand why this is still a Catalist listing.

Wednesday, 14 October 2009

Jason Marine Group Limited

Jason Marine Group Limited is one of the leading providers of integrated solutions of a wide range of marine communication, navigation and automation systems based in Singapore.  The company is offering 16m New Shares at 21 cents (of which 15.5m will be via placement and the rest via public offer). It is encouraging to see companies trying to list on Catalist actually attempted to make a public offering. This is very refreshing vis-a-vis what was being done by Primepartners for most Catalist listings. The offer will end on 19 Oct 2009 at 12pm. The market cap post IPO will be S$22.3 million.

Revenue grew from S$40.7m in FY2007 to S$70.9m and net profit grew from S$1.6m to S$6.4m in the same period.  The Financial Year ends on 31 March 2009 and the EPS for FY 2009 based on post invitation shares is Singapore 6.03 cents and that translate into a listing PER of 3.48x.  Assuming the EPS grow by 25% in FY 2010 and a fair value PE of 4-5x for Catalist listings, the EPS will be 7.54 cents and the fair value will be between 30 cents to37 cents.

Tuesday, 6 October 2009

Hengyang Petrochemical Logistics Limited

Hengyang Petrochemical Logistics Limited is the first "S-chip" to go for a Catalist listing. Not sure what so "glam"about this though but the Company is principally engaged in the storage and transportation of liquid petrochemical products.  The company currently has 37 storage tanks with a 97,600 m3 capacity.  The company has commenced construction and installation of another 12 new carbon steel storage tanks to be completed in Q4 2009.  Another facility will be completed in 2 phases will add another 118 new storage tanks and 300,000 m3 capacity.  The company is offering 18m new shares via placement at $0.38 each and the offer will end on 8 Oct 2009. 

Revenue for FY 2008 is RMB 65.3m and profit after tax is RMB 25.9m. The first half 2009 revenue is RMB 31.7m (decrease of 3%) and profit after tax is RMB 9.97m (decrease of 31.5%),  Assuming the service agreement is in place and based on the post-invitation no. of shares, the EPS for FY 2008 will be 4.32 cents. This translate into a historical PER of 8.8x at listing. With the profit declining by 31% and assuming this trend continue, FY2009 full year EPS is likely to be 3.024 cents and that will translate into a forward PER of 12.5x. The market cap is $44.8 million based on the IPO price.

The company is one of the "better-looking"catalist listing but is fully priced at the IPO price. However, the future plans looked somewhat exciting as more storage capacity come on stream progressively. Lets see if the management can deliver value to its shareholders next time.


Monday, 5 October 2009

Goodland Group Limited

Goodland Group Limited is placing 30m new shares at 20cents each for a Catalist listing.  The company is a boutique property developer engaged in the development and sale of residential properties in Singapore.  The company focused on small and medium sized landed housing and residential apartments.The offer will close on 6 Oct 2009.

Based on the IPO price, the company is priced at a premium to its NTA by 266% and at 16.7 times FY 2008 PER based on the post IPO share capital and pro forma earnings assuming the service agreements were in place.

Personally, i never like property developers as the earnings are likely to be lumpy, subject to market cycles and hard to predict as revenue comes on stream. The overpriced IPO is not helping and with the weak market sentiments, it will be amazing if it can do well on debut.

Saturday, 3 October 2009

Parkway Holdings (Kim Eng initiates Buy with $3.24 PT)

Kim Eng is initiating coverage on Parkway with a Buy recommendation and a $3.24 price target. You can access the full report here.

Our Take

Miles ahead of its competitors
Parkway is the "de facto" standard for highly complex medical procedures, and a class above its peers. We are excited about their upcoming Novena hospital as it is setting itself miles ahead of its competitors. We are also looking forward to its exciting growth tragectory through the rapid expansion of its hospital operations in Asia.  At 13x FY10F PER (including gains from sale of 1/3 of medical suites at Novena), Parkway is still trading close to 'crisis-level' valuations. 

Sale of medical suites poses as potentially strong catalysts
The strongest near term catalyst could come from the potential sale of 1/3 of its medical suites at the new and upcoming hospital at Novena. Parkway is preparing to launch them in 1Q10, at indicative selling price of $3500psf. Proceeds from the sale (~$200m) can be deployed towards reducing the Group's net gearing, which currently stands at 0.4x. Parkway is likely to be successful during the first launch due to the pent-up demand from doctors and recent transactions done at Farrer Park Mediplex (at $3000-3500 psf)

We initiate coverage on Parkway with a target price of $3.24, based on a SOTP valuation. It has been a laggard in the recent rally. The timing is ripe for a strong entry now.  

Friday, 2 October 2009

Ziwo Holdings Ltd

Ziwo Holdings Ltd is "different" from most recent IPOs in that the vendors are cashing out big time (in full to be exact)!  The company is offering 121.512m shares consisting of 60m New shares and 61.612m Vendor shares. Ziwo is engaged in the research and development, manufacture and sale of SBR and other foamed materials. A closer look at the vendors throw out some interesting shareholders such as a Venture Capital firm, an ex-minister, a market player who recently took stakes in many small caps, a partner in an accounting firm, among others.

Revenue for FY 2008 is RMB 286.8m and net profit is RMB 57.7m. The EPS for FY 2008 after accounting for service agreement and new share base is 4.60 cents. Based on the IPO price of 23.5 cents, that translate into a historical PE of 5.1x.  The market cap is S$58.56m. Q1 2009 revenue stands at RMB 76.9m and net profit at RMB 22.7m. The Q1 net profit is actually very impressive and is already 40% of FY2008 full year profit. Assuming a more conservative 50% growth in profit for FY2009, the EPS for FY2009 will be 6.9 cents and with a fair value range of 4-7x PE will translate into a price of 28 cents to 48 cents.

It is interesting to note that Group I investors that came in April 2008 paid 11.75c while Group II investors that came in Feb 2009 paid 8.03 cents. I guess that is because Group II investors came in at the peak of the Financial crisis and is rewarded for taking that risk. It is also interesting to note that all the pre-ipo investors are cashing out at the IPO. Do you really believe that the underwriters will allow the pre-IPO investors to 'cash out' big time"?

It will certainly be interesting to see how the shares are being placed out at IPO and who they are placed out to. In my personal view, this is an innovative way to avoid the usual 6 to 12 months moratorium for the pre-IPO investors. By "selling out" at IPO and then getting friendly parties to underwrite and subscribe for the shares, the vendors effectively strike 2 birds with one stone. First, they are able to avoid moratorium on the remaining shares and second, they are able to control who the shares are placed out to and thereafter, perform some post IPO support to the shares.

This stock will be interesting to watch at IPO and worth a stag, barring any major crash in the US and local market.

Saturday, 26 September 2009

Superman underpants?

Great Group holdings must have employed Superman to be its underwear spokesman. The share price debut at 31 cents and fly all the way to a high of 43 cents before closing at 41.5 cents, up a whopping 40% from its IPO price. The volume traded was a whopping 86.8m shares, more that the no. of shares issued and sold by vendors for this listing! Gaoxian's underwriter and issue manager could well learn a few tricks from Daiwa by limiting the number of shares issued and placing the shares to strong hands who can then do some post market activity. Shortists who tried to short the counter were certainly caught with their pants down this time. hahaha :)

Wednesday, 23 September 2009

Oceanus Group Limited

DMG initiated coverage on Oceanus Group Limited. Initiation report is always detailed and filled with many pictures and update about the company. I decide to make this blog more informative by including initiation reports (the more interesting ones) and you can download the report by clicking on the link below.

Oceanus Group: S$0.36               

BUY (TP: S$0.52)

Emergence of an abalone behemoth

Initiate  coverage  with BUY; Target price at S$0.520. Oceanus, the largest land-based  abalone  producer,  is  gunning  to  be  the  first  vertically integrated  abalone  group.  Its  tie-up  with  renowned  restaurant chain, HK-based Ah Yat Abalone Group, is particularly exciting. With plans for 170 stores  by  FY11,  the  JV  may  be  able  to rake in as much as RMB100m in earnings. If it were to list by then, it should be able to easily dwarf all restaurant  groups  in  Singapore.  Organically,  its  production  business continues to thrive and we expect stronger sales in FY10.

Volume  and  cost  leader  can potentially drive market share gains. As the largest  abalone  producer,  it  has  ~110m  caged  abalone  ready for sale (excluding  ~140m  uncaged young abalone) and a staggering 12km2 of abalone farm  stretching  from  Zhangzhou  (Fujian) to Guangzhou (Guangdong). Given economies of scale, it is able to sell its abalone more cheaply compared to its   competitors   (RMB0.30/kati   vs   RMB0.60-0.70/kati).   Oceanus  can potentially  consolidate  the market by reducing its price, a move which we consider to be plausible.

170  restaurants  to  earn RMB100m by FY11. Oceanus entered into downstream abalone  retail  and  processing business through a 70:30 JV with Ah Yat in favour  of  Oceanus  in  2H08.  The  restaurants  are  targeted at the mass affluent  rather  than the rich. Currently, there are six operating outlets in  Shanghai  and  Hong  Kong  with  16  more  to  come  by the end of year (including  one  in  Singapore  which  will  open on 21 Sep 09). Management targets 170 restaurants and RMB100m earnings by FY11.

Attractive  vis-à-vis  peers.  We expect Oceanus' PATMI to rise 46% and 25% for  FY09F  and  FY10F  respectively  on  the  back  of  growing  number of profitable retail  outlets  and  the  contribution  from  the  processing business.  Our  target  price  of S$0.520 is based on a 30% discount to the peers'  P/E  relative to their respective indices (15.6x FY09 and12.2x FY10P/E).

Oceanus Research Initiation by DMG

Sunday, 20 September 2009

Great Group Holdings Limited

Great Group Holdings is an established undergarment manufacturer in the PRC.  It is the contract manufacturer for ODM and OEM basis as well as under the "GRAT.UNIC" brand.  The Company is offering 65m new shares and 15m vendor shares at $0.295 each. 78m shares will be via placement and 2m shares via public offering. The offer will end on 23 Sep 2009 at 12pm.

Revenue grew from RMB 146.4m in FY 2006 to RMB 400.8m in FY 2008 and net profit grew from RMB 22.2m to RMB 70.8m in the same period. Assuming the service agreement was in place at the end of FY2008, the EPS per share will drop from 7.2 Singapore cents to 7.15 Singapore cents. Based on the post-IPO shares of 265m shares, the pro-forma EPS will be Singapore 5.40 cents and that translate into a historical listing PE of 5.46x.  The NAV per share after listing is 18.29 cents and the market cap is $78.18m. It is a shame that i could not find 1H 2009 unaudited results in the prospectus considering that we are already in Sep 2009!

The directors intend to distribute 20% of its net pforit for each of FY 2009 and FY 2010. Unfortunately, i am unable to predict what kind of profits we can see in this year and next even though the historical growth rates has been impressive as there are no 1H09 earnings included in the prospectus. In most normal cases, if the company is doing well, they would be "dying" to include the 1H figures in the prospectus. I really wonder what is the SGX regulations with regards to this (unless i am really blur and miss out the figures in the prospectus).

Listed S chips in the garment sector include Bright Orient, China Fashion and they are either not doing well or trading at pathetic valuations.  As such i believe the IPO is fairly priced. Assuming a PE range of 4-6x for this undergarment company, the fair value will be 22 cents to 32 cents. Looking at the trend of the last 2 S chip IPOs, Passion and China Gaoxian, i suggest giving this IPO a miss if your only intention is to 'stag' it.

Friday, 11 September 2009

China Gaoxian Fibre Fabric Holdings Ltd

China Gaoxian Fibre Fabric Holdings Ltd is principally engaged in the production and sale of premium differentiated fine polyster yarn and wrap knit fabric for the mid-to-high end markets.  The offer will close on 16 Sep 2009 at 12 pm. The Company is selling 380m shares (comprising 320m New shares and 60m Vendor shares). The market cap at IPO price is S$374.4 million.

Revenue grew from RMB 1.015 billion in FY 2006 to RMB 1.830 billion in FY 2008.  Net profit grew from RMB 203.1 million to RMB 390.4 million in the same period.  The EPS based on post-invitation share capital of 1.44 billion shares will be RMB 27.11 for FY 2008 (or Singapore 5.69 cents using an exchange rate of RMB/SGD of 4.75). At the IPO price of 26 cents, that translate into a historical listing PE of 4.57x.  The NTA per share after accounting for IPO proceeds is Singapore 13.34 cents.

While the pre-ipo investors are cashing out at the IPO via vendor sale, the "good thing" is that they have undertaken a 12 month moratorium period instead of the usual 6 months, which is good under current market.

The listed comparables such as Li Heng are trading at 3.92x 08 PE and China Sky at 2.58x 08 PE respectively and it is tough to prescribe a higher multiple to this company when the peers are not doing too well. Much will depend on the IPO sentiment on its debut. The fact that it has a huge float and is one of the biggest IPO this year may not help in sustaining the share price post listing. Without considering any growth in the 2009 profit figures, a fair value of 4-6x PE will translate into a price range of 23 cents to 34 cents. My view is that the positive sentiment will give it the initial boost but dont bet that it will stay high for too long unless the entire S-chip fibre sector is re-rated upwards.

Tuesday, 25 August 2009

Passion Holdings Limited

Passion Holdings Limited is selling 126.5m shares at 25 cents each (comprising 90m New shares and 36.5m Vendor shares).  2 m will be through the public offer while the remaining 124.5m shares will be via placement. The IPO ends on 31 Aug 2009 at 12pm.

The company is an integrated designer, producer and retailer of wide range of handicrafts and furnishings. The manufacturing facilities are located in Longyan City, Fujian Province and the products are either sold under its Passion brand name or as ODM products.

The financial year end is June 30 and revenue has grown from RMB 277m in FY2007 to RMB 542m in FY 2009.  Net profit also grew from RMB 63.88m to RMB 111.635m during the same period.  The market cap is S$97.5m post IPO. The EPS based on 390m shares is RMB 28.62 cents or Singapore 6.06 cents. Based on the IPO price of 25 cents, this translate into a historical PER of 4.12x, which in my view, is fairly valued for a S-chip. In addition, the pre-IPO investors got in at a very low price of less than 10c! If the market PE expands to 6-8x, then it will translate into a fair value of 36 cents to 48 cents.

Personally, i don't really like this company due to the kind of business (highly competitive) it is in and the fact that the vendors are cashing out. This is one of those "Sell on first day" kind of IPO to me just to take advantage of the positive IPO sentiments.

Thursday, 13 August 2009

Latitude Tree International Group Ltd

Latitude Tree International Group Ltd has over 9 years of experience in the wooden furniture industry. The Group is a leading manufacturer of quality lifestyle wooden home furniture, with a product range focused on Collection Sets. The largest exporter of wooden furniture in Vietnam (from 2006 to 2008), the Group’s products are manufactured in Vietnam at 2 production facilities with a total built-up area of 232,342 square metres.

The main product categories are bedroom Collection Sets, dining room Collection Sets, living room Collection Sets and others. Most of our customers are based in the USA and Canada and the bulk of our products are exported to the USA. Our Company is a subsidiary of Bursa Malaysia-listed Latitude Tree Holdings Berhad.

The Company is offering 36m shares at $0.22 each for a Catalist listing. (For those who are asking how to apply for the IPO, the answer is that you have to be a client of DMG or close associates of Prime Partners before you can apply for the placement shares. There is NO public tranche at all.) The offer will close on 17 Aug 2009 at 10am.

The Company generated sales of S$108.725m in FY 2008 and the net profit was S$9.305m. As you can see from the picture above, while sales has been increasing steadily over the last 3 years, net profit has remained stagnant and has even declined. This indicates a margin squeeze over the last 3 years. However, interestingly, the sales and net profit for the first half of 2009 improved dramatically where sales for the first 6 months is $67.6m and net profit is $5.1m. See the chart above. I really dont want to get overly excited about this increase at this juncture as it seemed to me "too good to be true". The figures are unaudited and after all, this is a PIPE deal as the parent company is already listed in Malaysia. Really makes me wonder why it would want to seek a Catalist listing here. Anyway, assuming the sales doubled in FY2009 to $135m and net profit also doubled to $10.2m, the EPS based on post-IPO shares will be 4.26 cents. Based on the IPO price of 22 cents, this translate to a forward PE of 5.16x and the market cap is around $52.72m. The Company also intends to distribute 30% of its profits as dividends for the next 3 years.

Off hand, i can think of 3 furniture stocks listed on SGX: HTL, Koda and Cacola but Koda and Cacola are not doing well in FY2009 while HTL has returned to profitability in Q1 2009. Cacola and Koda are currently trading at 0.92x and 4.16x historical PERs. HTL is currently trading at 60% discount to its book value even thought Q1 profit is $14.8m whereas Latitude will be issued at a premium to its NTA.

In any case, i believed the IPO is fairly priced at 22 cents and i am no fan of the furniture industry. Investors who are keen to invest in this company may want to do a more detailed analysis of HTL as a comparison as i personally believe HTL offers better value at current prices.

But as you can see from the IPO debut of Mary Chia, fundamentals dont really matter in the short run and positive market sentiments will likely mean a positive debut for Latitude and in the long run, we are all dead anyway :P (just kidding).

Wednesday, 5 August 2009

Mary Chia Holdings Limited

(This person is not Mary Chia :P but the spokeswomen "李锦梅")

Mary Chia Holdings Limted is one of the leading lifestyle and wellness service provider in Singapore. It is offering 24.565m new shares at 23 cents per share to investors via placement only and will be listed on the Catalist and the offer will close on 6 Aug 2009 at 12pm.

Revenue has grown from $10.84m in FY2006 to $13.46m in FY 2008 while net profit increased from $0.75m to $3.05m in the same period. The NTA post IPO will be 3.3 cents. The earnings per share for FY 2008 assuming the service agreement is in place will be 1.60 cents and based on the IPO price of 23 cents, the company is being priced at a historical PER of 14.4x (expensive!). The market cap post IPO will be $37.6m

You would have known by now that i dont like Catalist listings as a high percentage of the proceeds raised are paid to the Sponsors. I have no idea what is the point of raising $5m and giving $2m away. It is crazy! In addition, post listing, the mother - Mary Chia and her daughter - Wendy Ho, own 81% of the company and investors are purely minority shareholders. Prior to the IPO, the company has also declared generous dividend to its owners and the company still owes money to the founders post IPO. Given the low profitability, the Company will still pay generous package of at least $500,000 to the founders.

Avoid this IPO. The business is too localised with many unlisted competitors such as Expressions and Jean Yip.

Monday, 3 August 2009


(IPO booth at Raffles Place)

Finally a mainboard listing in such a long time!!...

PEC is a specialist engineering group servicing the oil and gas, petrochemical, oil and chemical terminal and pharmaceutical industries. PEC is offering 2m shares for public subscription and 61m shares via placement at 40c each. IPO will close on 5 Aug 2009 at 12pm. The public will hold 26.5% after the IPO.

Revenue has grown from S$149.3m in FY2006 to S$314.6m in FY2008. The net profit after tax also increased by S$8.3m to S$27m in the same period. Revenue for 1H2009 is $220.6m and net profit is $12.4m, an increase by 88% and 8.35% respectively. Based on post invitation no. of shares 238m, the EPS for FY2008 is 10.55 cents. At the IPO price of 40c, the IPO is priced at 3.79x.

Assuming FY 2009 profit is S$29.2m, the EPS will be 12.3 cents. Currently Rotary is trading at 12.8x historical. If we give it a 30% to 40% discount given its 'smaller' size and newly listed status, the fair value PE range will be around 7x to 9x. That will translate into a fair value of 86c to 111 cents.

The IPO is attractively priced and offers good value and potential to more Middle East EPC contracts. Investors will do well to subscribe to this IPO as downside is limited.

Thursday, 16 July 2009

Singapore Medical Group Limited

Singapore Medical Group Limited is placing 25.6m shares (comprising 8.55m new shares and 17.05m vendor shares) at 21 cents each for a listing on Catalist. Once again, Primepartners have teamed up with DMG to launch this issue. Prime has also helped list its peers Healthway back in June 2008.

The Company is a healthcare industry and provides specialist healthcare services. It is established in the fields of LASIK procedures and sports medicine. Revenue has grown from $4.3m in FY2006 to $30.1m in FY2008 but net profit has been more "volatile", increasing from $1.3m in FY2006 to $8.1m in FY2007 before dropping to $5.0m in FY 2008. The offer will close on 21 July 2009 but is via placement only. The market cap post IPO will be $30.6m. EPS based on the enlarged share cap and FY2008 net profit assuming the Service Agreements have been effected will be Singapore 2.87 cents and that will translate into a PE of 7.3x historical.

There are not much IPO proceeds to talk of, the majority of the amount raised will be paid to the owners of the company and after deducting the IPO expenses of $1.063m, there will only be $0.7m. I feel that the IPO expenses should be borne on a "pro-rata"basis since the majority of the proceeds raised is going to the vendors. The company intends to pay an interim and final dividend approximately 20% of the consolidated net profits attributable to shareholders for FY2009 and FY2010. After the IPO. the public will hold 17.6% shares and is likely to be thinly traded. It is interesting to note that 3 directors will be paid more than $250,000 per annum for FY 2009 while only 1 received such remuneration previously in FY 2008. The company also has a few family members working in the firm but their pay will be reviewed annually to ensure it is "fair".....hmmm..

Anyway, while i like the way which the company is being positioned (to earn money from the "ai swee" people who goes for asthetic surgery), i think the company is fairly valued at its IPO price. However, it is trading at more attractive valuations then Healthway.

Thursday, 9 July 2009

JLJ Holdings Limited

JLJ Holdings Limited is a provider of precision mould design and fabrication, injection molding and value-added services. The Group provides design, fabrication and sale of precision plastic injection moulds (“MDF”), precision plastic injection molding (“PPIM”) services and other PPIM-related value added services at its production facilities in Singapore, Johor of Malaysia and Kunshan of the People’s Republic of China.

MDF Business

The Group produces plastic injection moulds for the consumer electronics, household appliances, automotive and computer peripherals industries. Such moulds are then used to manufacture different types of precision plastic components which are typically used as parts of its customers’ finished products, such as mobile phones, household appliances, computer peripherals, MP3 players and automotive components.

PPIM Business

The Group offers a variety of PPIM services including single-shot moulding, double-shot moulding, insert moulding and gas-assisted moulding. Each type of moulding allows different types of precision plastic components to be produced, allowing us to produce a wide range of precision plastic components which are typically used as parts of our customers’ finished products including mobile phones, computer peripherals and MP3 players.The Group also offers value added services, which entail sub-assembly, laser etching, ultrasonic welding, printing services and mechanical assembly services.

JLJ is going for a Catalist listing (not another catalist... !?) and is offering 19m shares (16m new and 3m vendor) at $0.27 each via placement. The offer will end on 9 July. The listing expenses is $1.55m and the total fund raised. Only $2.77m will be left for the company... sigh... what a waste of time!!!

The company sales and profit for FY 31 Dec 2008 are $50.8m and $4.8m respectively. Assuming the company is able to achieve similar levels of profit in FY 2009 and that the service agreement is in place, the net profit will be $4,728,221. Based on the post IPO shares of 123,551,245 shares, the EPS will be Singapore 3.8 cents. Based on the IPO price of 27c, the IPO is priced at a forward 7.1x PE. The market cap is $33.4m.

Considering that Meiban and Hi-P are trading at low single digit PEs of less than 5x, it makes JLJ Holdings looks expensive relatively to the more established companies with bigger market cap and profitability. I would avoid investing in this company and put my money into either Meiban or Hi-P instead if i really want exposure in this sector.

Global IPO Update


Q2 sees US$9.9bn in capital raised compared with US$1.4bn prior quarter, buoyed by Brazil’s largest ever IPO Global IPO activity increased in Q2 with 76 IPOs worldwide compared with 52 the prior quarter, according to Ernst & Young’s second quarter Global IPO update. Deal value increased seven-fold to US$9.9 billion from just US$1.4 billion. However activity remains sharply down on 2008 levels when the second quarter saw 269 IPOs raise US$38.2 billion in capital.

This quarter’s figures were bolstered by Brazil’s VisaNet deal (US$3.7 billion), which is the largest IPO worldwide so far this year and Brazil's biggest ever; metals company China Zhongwang Holdings Ltd (US$1.3 billion); and Vodafone Qatar (US$0.95 billion). Together these deals accounted for 60% capital raised worldwide. Reflecting these IPOs, Brazil and China accounted for two-thirds of global capital raised for Q2.

As in Q1, the most active country this quarter was South Korea with 17 IPOs (8 IPOs, Q1). China and Canada followed, with 13 and 9 IPOs respectively. China’s nine month ban on IPOs at the Shenzhen exchange came to end this quarter with an offering by Guilin Sanjin Pharmaceutical. The United States also saw an uptick in activity rising from 1 IPO in Q1 to 8 in Q2, of which 6 made the top 20 globally DigitalGlobe Inc; SolarWinds Inc; Bridgepoint Education Inc; Rosetta Stone Inc, LogMeIn Inc and MediData Solutions Inc. Emerging markets accounted for 53 of the 76 global IPOs.

The threshold values for the top ten global IPOs has improved dramatically this quarter up from US$12.0 million to US$171.3 million, but still radically down year on year (US$848.6 million).

Max Loh, Singapore IPO Leader and Assurance Partner, Ernst & Young LLP, comments: “We have seen an increase in global activity in the second quarter but capital raised is at a fraction of the prior year. Early signs are that the wider economy has bottomed out but recovery is likely to take time and will vary by region. In terms of number of IPOs, the Asia Pacific region has been relatively more active and accounted for 60% of the global IPOs, with the South Korea and China/HK markets leading the pack.”

Loh adds: “The IPO market generally trends the macro-economy albeit with a time lag. Historically, markets have taken at least four to six quarters to recover from an economic downturn. However, there are examples of highly successful IPOs that emerge from post recession periods. These companies, having survived the ultimate stress test, are often leaner and have demonstrated the resilience of their business model. It’s a good time for dynamic entrepreneurial companies. And the high performance of stock exchanges around the globe in the second quarter has resulted in renewed interest in companies around the world to go public.”

The leading sectors by number of deals were Industrials (16); Materials (14); Financials (10) and High Technology (10). Due to the low value of funds raised, the top three sectors by capital raised mirror the top three IPOs. Financials (US$3.8 billion), Materials (US$1.8 billion), and telecommunications (US$1.2 billion) accounted for 70% of total capital raised.

For the year to 30 June 2009, the top three exchanges by number of IPOs are South Korea’s KOSDAQ (24); Hong Kong Stock Exchange (14) and New York Stock Exchange (7). By funds raised, the top three exchanges over the same period are the BOVESPA in Brazil with the one IPO (VisaNet at US$3.7 billion); Hong Kong Stock Exchange (US$2.5 billion) and the New York Stock Exchange (US$1.7 billion).

Follow-on offerings

The completion of follow-on offerings in established public companies is sometimes regarded as an indicator of IPO market revival. Between Q1 and Q2 there has been more than a 100% increase in the number of deals (up from 612 to 1,361) and capital raised (US$101.1 billion to US$284.2 billion). However, in terms of value, this has mainly been driven by financial institutions seeking to recapitalize and repair balance sheets.

In addition to follow-on offerings, Ernst & Young’s Global IPO trends report 2009 notes that market analysts commonly cite the following indicators of an IPO market revival: positive fund flows into the equity market, investor appetite, brighter corporate earnings outlook, recovery in market valuations, evidence of liquidity to spur business and consumer spending, successful public-equity transactions involving carve-outs/spin-outs from existing large public companies and new VC/PE-backed IPOs.

Thursday, 2 July 2009

Heatec Jietong Holdings Ltd

Not another Catalist listing?!... Heatec Jietong is offering 18.5m New Shares at $0.275 each. The IPO is through placement and will close on 6 July 2009. Trading will start on 8 July 2009.

The Company is one of the leading piping and heat exchanger specialist in Singapore servicing the marine and oil & gas industries. The company made S$46.5m sales in 2008 with a net profit of $6.64m (net margin of 14%). The listing expenses is $1.44m and the net proceeds raised is $3.65m. (I can never understand why the listing fees is so high versus the amount raised... a real waste of time and money for the company...)

The company is issuing shares at around 5x PE and will have a market cap of $33.33m post listing. The company is fairly valued at the IPO price. Assuming the net profit for 2009 is slightly better and have a fair value PE of 6-8x, there could be some slight upside post IPO but for me, it is only a mediocre issue. Since this is a "placement only" issue, you will have to know someone from either DMG or Prime if you really want it..

Tuesday, 26 May 2009

Teho International Inc Ltd

Teho International Inc Ltd ("Company") is placing out 16.8m shares comprising 11.8m New Shares and 5m Vendor shares at $0.24 per share for a listing on Catalist. The Company is a supplier of rigging and mooring equipment as well as related services to customers in the marine and offshore O&G industries. The IPO will start trading on June 4, 9am.

Revenue grew from SGD 25.1m in FY 2006 to SGD 25.3m in FY 2008 while profit after tax rose from SGD 1m to SGD 8m in the same period. The revenue for 1H FY 2009 is SGD 18.7m and the net profit after tax is SGD 5.7m. The listing fees cost approximately S$1.6m. Frankly, to raise S$4m fresh money only to "pay" $1.6m in expenses hardly makes any sense just to buy a listing status. The financial year is from 1 July to 30 June.

The EPS for FY 2008, assuming the service agreement was in place, will be 7.5 cents based on pre-placement capital of 100m shares and 6.7 cents based on post IPO 111.8m shares. At the price of $0.24, the company is listing at a historical PER of 3.58x, which is reasonable for investors under current market conditions. After listing, the Company will have a market cap of S$26.8m. (Ultra small cap). After the listing, the Company will only have 15% public shareholders while the Lim siblings will own approximately 85% of the Company. Investors who are wary of being a minority shareholder should avoid this company and trading liquidity is likely to be an issue as well.

The oil and gas industry outlook will likely remain positive for the coming years and net margins looked pretty decent for this company. The Company intend to distribute 20% of its profit as dividends for FY 2009 and FY2010. Assuming net profit after tax is S$11.4m for FY 2009, the dividend per share will be 20% x 11.4m divide by 111.8m shares = 2.04 cents. Based on the IPO price of 24 cents, the dividend yield would be a respectable 8.5%. As of 31 Dec 2008, the NTA was 17.1 cents.

My personal view is that the IPO is attractively priced with a promise of good yield if the Company is able to deliver profits for the next 2 years. However, the downside will be the small public float and lack of institutional investors (for corporate governance, which may or may not be an issue). Other than that, the same old set of "issues" for small cap companies exist such as lack of analyst coverage and outside most fund manager's mandate due to the small cap and small public float.

It is however, good to see a listing again after a long break (even though it is a Catalist listing). My view is that many companies will attempt for an IPO listing again should the IPO window be opened by Teho....

Thursday, 23 April 2009

Confessions of a S-Chip CEO

I received this article from a broker today. The speculation is that the writer is the ex-CEO of Fibrechem and he was referring to the D&H team. I have no idea how "authentic" this email is but i have to say that i am "not surprised" by the contents of what was alleged in the email. It is an interesting read for the "IPO" market. If you want to "read" only the gist of the story, start from "Then my life-changing incident took place." in red below


We are victims as well!!! Let me tell you the story. By the time you read this article, it would reached have hundreds of investors, bankers, regulators and journalists. My purpose was to shed some light on the “dark sides” of the business of S-Chips (Chinese companies listed on Singapore Stock Exchange), so as to help prevent more financial losses in the future hurting the ordinary people on the street. From this angle, I wish to redeem myself somewhat.........

It all started some 6-7 years ago. My colleagues and I were just a few of the million of entrepreneurs in China struggling to make ends meet at the textile fibre factory that we bought from the government. Some of our older colleagues had laboured for more than 20 years before having the chance to “privatise” the state-owned textile fibre factory in Fujian Province that we have worked for since the day we left school under the Premier Zhu’s “government retreat, private sector advance” scheme, literally at a song. We thought we were going to be very rich very soon. Little we knew that when the local governments of the various counties and villages decided to “retreat”, we end up! with thousands of “privately-owned” textile fibre spinners that competed ever more aggressively. Despite ever rising revenue, margins were disappearing fast....... Sometime, we just wonder why we have worked so hard only to earn next to nothing. Perhaps, our only reward was meant to be “the master of our own destinies”...... But we never really gave up hope...... One day, we shall strike gold.......

1990, the year after the TianAnMen Incident, was really a very difficult year. Many of our clients, the textile manufacturers who were enjoying the initial euphoria of the burgeoning export demand, went belly-up within a short 2 years of economic contraction. However, we pulled through all the vanishing receivables and anguish cashflow-balancing exercises.

By 1993, we were off for the biggest boom ride of our life-time. Our textile fibre business blossomed as China becomes the clothing factory of the world, benefiting not least from the one-off Renminbi devaluation that the Chinese government engineered in 1994. Those were the good old days, where sufficient numbers of our competitors were eliminated by the TianAnMen-induced recession, and the world began to look to China for every piece of garments stretching from the heads to toes.

Money was easy......and we expanded our production capacity as quickly as we could, limited only by the fact that the state-owned banks were not really very keen to lend money to private enterprises like ours, and we just have to borrow from our villagers at some 15% interest rates!!! Nevertheless, we did good business and our leader, the general manager of the factory, could even afford a chaffer-driven Santana. In any case, he was too old to learn new trick, even as simple as driving itself. I was the rising star which had to bide my time, as I was the only person who speaks decent English. I was meant to be the tongue of the company in dealing with the external world. But I am getting impatient. For while the company was booking increasing profits, we never seems to have cash to be distributed as any excess cash generated from the business was never enough to cover the capital expenditure needed to expand the production .

We just owned an ever-growing production business. Unfortunately, good profit margins never last in China. Good demand quickly attracted new entrants into the business as the barrier of entry is relatively low. At the same time, some of the so called “obsolete capacities” came back from the grave and soon, we found ourselves struggling to churn our profit. It was like working for free again......lots of revenues but just no profit!!!

By the middle of 1990’s, we were doing great business selling to our customers in different areas of the coastal areas. In 1995, we suddenly found ourselves having to deal with fast rising cost pressure. However, the market was buoyant enough for us to raise our product prices to pass on the cost increase to our customers. Then, we realized that we must move ahead in term of technology and product offering. Like everyone else around us, we took advantage of the tax concession offered by the government to the so-called joint venture companies. We recycled our “cash” to Hong Kong, set up a “foreign company”, which in turn pumped back the cash to Fujian in the form of a joint venture entity, using the cash to purchase some second-hand German equipment to produce the chemical fibre! s needed in all kinds of fabrics and artificial leathers.

However, luck did not really favour us, at least thus far. Soon, we were told that our economy was experiencing very high inflation rates and soon, the then Premier Zhu Rongji stepped a hard brake on the economy, cutting the bank credit to many state-owned enterprises which were producing things that no consumers wanted. While as private enterprise we did not enjoy the benefit of bank credit, its sudden massive contraction hurt us as bad as the state-owned enterprises who received such reckless loans. We were entangled like the other enterprises in what we called the “triangular debt” problem, where everyone owes the next person money and there was just no money at the source for anyone to get paid.......!!! The situation last for quite sometime as we lived from hands to mouths, sometimes having to send out local thugs to chase for receivable payments from cash-strapped clients. Then again, what else can we do? We had so much or our friends’ and relatives’ money with us investing in all these machinery now that the only road for us is to struggle forwards......turning back would have made us the “outcast” of the village....... By the time the rest of the Asian economies cracked in 1997 amidst the so called Asian Financial Crisis, we were already becoming numb to bad news. I remembered there were days that I wished I had not joined the textile industry, or any industry at all......for making money out of making something is so darn difficult....... I thought I might have just wasted my youth. Somehow, we managed to pull through as a group. The general manager of the factory, who is now getting seriously old, made his sacrifice along the way by selling his Santana in order to keep more mouths fed. We all had no where else to turn to but to continue pushing hard to sell our new product, the chemical fibres.

Finally, by year 2000, the economy began to recover. Our hard work and persistence were also beginning to get paid off handsomely as China had become the centre of all textile, shoe and furniture manufacturing in the world, and all these products required some forms of chemical fibres. We were beginning to rake in cash beginning 2002!

Then my life-changing incident took place.

One fine day in late 2002, I was introduced over the dinner table to one Singapore “Deal-maker” who was to become one of the richest men in his country in the next 5 years. Mr D was still a “relatively” poor deal-maker at that time. Just like many so called “deal-makers” running around China at that time, they hope to make small fees introducing companies to capital, or vice versa. Mr D claimed that he had successfully engineered a number of private equity transactions in China, helping companies with so called “mezzanine” financing to prepare the companies to be listed in stock exc! hanges outside of China. He was fully aware of the psychology of Chinese entrepreneurs and their deep dissatisfaction with the bias of the Chinese government in allowing only state-owned enterprises to list on the local stock exchanges. To us, having a listing status in China is like having acquired the right to print money. One just has to cook up a nice investment story and he could get Chinese investors to subscribe to the right issues of a listed company at any price. It was so much more an elegant way to make some money, rather than to have to toil for a few cents selling chemical fibres....... Mr D went further to claim that he had taken some of the invested companies public in both Hong Kong and Singapore Stock Exchanges and given his investors had made some money, he always have a group of ready-investors willing to back all his “stock picks”. He went on to ask quite a number of detailed questions on the operating conditions of our companies over the dinner, jotted them down carefully on a small note book along the way. Later on, we adjourned up-stair the restaurant for a KTV session. I must admit that I remembered clearly Mr D was a good Chinese song singer, having sung some hot-off-the-chart songs that I heard my niece hummed sometime shortly before the incident. His smooth handling of the KTV girls, which he asked for two concurrently, also showed that he had been around.........

The next time I met Mr D was three months later, quite unexpectedly as I had thought he could have decided to give our company a miss given our relative small size. He requested for a factory visit which, after having consulted our old general manager, I accompanied throughout. As usual, no serious business until after dinner and getting slight tipsy after a few drinks forced down by the KTV girls in the evening. I must admit that Mr D is a seasoned operator. He was quick to recognise that I was an impatient young man to take over the operation from my older colleagues. Throughout the entire evening, he was trying to convince me to move the gear one notch faster to accept some private investors into the company, beyond which he was confident to help us to get the company listed in one of the foreign stock exchanges, where everyone will be able to cash out their profit if they so ! chose. I pretended to be sceptical while deep in my heart, I need no convincing as I have known many Fujian entrepreneurs shot to fame and riches, 2 of them by turning large tracts of collective land into vegetable farms and the other bending float glasses he bought from state-owned factories into auto wind-screens and sell them to car manufacturers. I never doubted that one can make a lot of money from car wind-screen, but I could have never imagined striking it rich planting vegetable.......!!!

Mr D and myself both agreed later that we need to convince the other older colleagues of mine to approve such a scheme, and over time, move them aside to allow someone young and dynamic person like myself to be the face of the firm to cater to the likings of the investors, who were mostly English speaking. In the meantime, my task was to convince the existing shareholders to allow a group of Mr D’s friends into the shareholding first, while paying Mr D a “structuring and introduction” fee along the way. The easy part was, as Mr D coached me on how to present to the rest of the shareholders, his fees will not be in “cash” but rather in equivalent value of “shares”. He said that was to assure everyone that he could only make money should he be able to engineer an eventual listing of the company on a stock exchange, after another year of lock-up period for promoter shares aft! er listing. All interests would be aligned, as he put it.

Mr D was indeed an experienced operator. He had anticipated all the concerns of the “older” colleagues of mine, who feared that this was another one of those “leather-bag-company” deal-makers that was trying to make money out of no commitment. So he got through the first “hurdle of trust” after my carefully orchestrated presentation to the “board” of the company.

However, there was still one important issue we could not resolve amongst the board members. The finance manager correctly pointed out that the company indeed, did not need substantial amount of cash at this moment as we were not expanding aggressively anymore. The market place for our products was relatively stable right now with demand and supply growing organically. We will not be able to drive higher sales without sacrificing our margins by cutting prices. In short, we can only grow organically at around 10% ! per annum, which was probably not the most exciting story for the investors. In fact, the board members did not see the need for new capital. However, the idea of getting listed did appeal to them. They too had many friend who had become “paper millionaire” after the companies got listed. They too were looking for the big-pay-off day. So I was tasked to come up with a solution. In other words, there was a “green-light”! I did not expect my luck! Almost immediately after the board meeting, I called Mr D to tell him the outcome, as well as the issues raised. Again, I thought he must have expected the outcomes. As he explained calmly over the phone, the first round investors (which he called angels) will not put in a lot of money so that they would not dilute the existing shareholders very much. These angels are the “connected persons” that will come in with their own money (through Mr D’s personal vehicle) that will help cement the way for some of the well known direct-investment funds to step in at a slightly later stage, which would provide the company with the credibility, other than funding, to convince the stock exchanges to allow the company’s listing, and the subsequent active participation of other institutional investors during the IPO. Mr D went on to explain that the process of getting a Chinese company list! ed was in fact, an art. There were not many people like him that could have the trust of many influential people to conceal their names behind his vehicle to invest in a company, not unless they have been working on other cases together before and having developed deep working relationship. These angels will see the company through the process from getting “restructured” to “listed”, rendering their helps in one way or another through exerting subtle influences on counter-parties, bankers, regulators and other investors. Mr D’s vehicle will participate in the shareholding of the company first, where they will invest up to 5% at book value. In other words, they demand for very cheap entry. Mr D will only take his fees later after having brought in the money from direct investment funds, in larger quantum, in the form of shares of the company at book value before the entry of new capital. He wanted 2% worth of the amount of money he would bring in from the funds in such shares. Subsequently, he went on to explain that this was the modus operandi these days as he could introduce us to the senior executives of the companies who had done business with him for further due diligence on his reputation. In particular, he emphasized that my colleagues should not be worried at all given the fact that it was going to be his and his friends’ money that will be in their hands, rather than the other way round. My older colleagues did find some solace in this argument later on.

As for the use of money, Mr D simply pointed out that we will have 6 month to a year to come up with a new plan on spending the proceed of investment, in the form of new technology and new products. “Aren’t you guys always looking for money to upgrade production machinery to produce new stuff for the market? It the same bunch of the customers anyway......”, so he quipped. So the decision process took a few months, where in between, Mr D sent in some accountants and lawyer to conduct some checks on our operation and accounts. We had nothing to hide then as we had no reason to fake anything. Everything was ours.......then. Subsequently, the “angels” came in, followed by, indeed, a number of reputable direct investment funds a few months down the line. We got a whopping US$20mn to put up a new plant to produce a new type of artificial fibre, the machinery of which was to be imported from Germany. The new product was in fact, attractive to a lot of customers. However, none of them were going to buy a lot of it at the beginning as they were not sure their customers were going to like the new types of yarns made of this new fibres. Business was not as brisk as Mr D had! hoped for.......

On the other hands, Mr D seemed quite keen that we could move forward in our listing process. He began to educate us the process and requirement of the stock exchanges for listing. We paid visit to Hong Kong and Singapore, talking to bankers and exchange officials, attending seminars, as organised by Mr D. We were all psyched up to be a rich millionaire once the company is listed. However, there was just this little problem.....our new products were not accepted by the market as fast as we had wished for. Most of our customers operate under very tight cash flow situation. They only have working capital to provide for the acquisition of raw materials to produce the yarns ordered by their customers. No one was going to spend a lot of money buying our new fibres, prod! uce large quantity of products to purvey them in trade shows, despite they all fed back with good comment on the potential of the new fibres. Very quickly, Mr D came up with an idea. In order to boost our sales numbers fast, he will raise another US$20mn of money from all the direct investment funds in the name of working capital need. As he explained, they often did the same tricks with those companies they listed before. They will raise new capital to produce the new products to sell to customers, encouraging them to help push the new products by offering them more favourable and longer payment terms. With the increased sales and profitability number, he could get the company to list very quickly to get more money to help push for more sales....... He claimed he had done it many times before and it had always worked out. The economy was recovering quickly in 2003, nothing was to going to go terribly wrong. When I asked whether that would be considered “artificially inflating sales number”, he laughed and quipped, with the capital markets on your side, you can engineer self-fulfilling prophesies!” Of course, this article cannot be complete, at this juncture, without citing Mr D’s favourite quotable quote. “Water enough money into any company, even a fake one could become real some day.” He believed so much in this that I thought one day, this could cause his downfall. So we went ahead, sold the new shares at higher valuation to another bunch of investors Mr D arranged. He took another round of commission in the form of shares. We were beginning to admire Mr D. Money flows through his hands like water and he did it so effortlessly.

We were no less impressed by his connection to some of the richest and most influential people, particularly in Singapore. You see, he was viewed as a successful Singapore entrepreneur made good in the vast land of the North. Through diligence and perseverance, he carved a niche for himself identifying promising Chinese companies to groom for listing on the Singapore Stock Exchange which was losing out in race to Hong Kong Stock Exchange as the Chinese! state-owned enterprises were encouraged to list in Hong Kong. Mr D was their hero, directing promising private Chinese enterprises to list in Singapore and along the way, enriching many “angels” and local investment banks in Singapore. I chanced upon many of these angels as well.

There were occasions Mr D would have called me to help arrange for some transport and accommodation in Xiamen for groups for “secret” visitors. They are usually small groups of 4-8 people. I would generally put them in comfortable Buick mini vans, receiving them from the airports, ferrying them to golf courses, restaurants and night clubs. They would usually visit one of two factories invested by Mr D. From my impression, these were the angels behind Mr D, which for obvious reasons, he had to please. There were bankers, lawyers, other deal makers, stock brokers, fund managers and people that do not have a job, simply because they were so rich already. Occasionally, there were ex-CEOs or Chairmen of large government controlled enterprises in Singapore. Once, I even met a supposedly ex-member of parliament in Singapore.

It was obvious to me that Mr D entertained them in separate groups at separate times, taking pains in ensuring that some of them were not aware of the involvement of the others, for some reasons. I was always invited to all these golf and night entertainment events for a simple reason: I speak English and Mr D wanted to be seen as having someone like me to watch over his investment in this part of the world and helped him to tap into different kinds of local relationship. The other Chinese entrepreneurs may not be comfortable in dealing with the whole bunch of English speaking Singaporeans.

One common trait of all these trips was that all these guys from Singapore seemed to love the night clubs in China. The daily programme always ended in some night clubs, where these guys would party till the wee hours, every night they were there. Mr D would sometime, when he was half drunk, tell me that he had again “nailed” some key relationship and one of the travellers in the group would soon be in his “Club”. He would whispered that someone in the group was the senior partner of an investment fund, or someone in another group was connected to the so-and-so in Singapore, or someone was closely associated with the chiefs of some Singapore banks, or someone had “influence” over the listing approval process of the stock exchange, and some would just be some new investors that he was trying to woo to invest in his pre-IPO projects or the shares in the companies that he sponsored the IPOs.

When I asked why they were all so tireless in their nocturnal activities, Mr D laughed, “This is what I call pent-up demand. You know these people cannot even come 100-meter close to any KTV in Singapore because of their social status. The opening up of China is probably the best thing that happened to all these Singaporean men, for they can at least release their “valves” once in a while........ Do you know how boring Singapore is? I have a permanent KTV room booked up in one of most posh KTV in Singapore, costing me half a mill ion Dollar at the minimum every year. Guess what, the only important guests I have using that rooms are from China!” Watching Mr D in action, I finally understood the true meaning of “club”. He had managed to combine the “social club of friends” and KTV clubs so well that I thought every successful Chinese businessman should learn. And in so many ways, the “club” in Singapore is really not that different from the “club” in China........ So finally, we got our act together to attempt a listing towards the end of 2003, after much of the financial twisting and engineering to make our company look like a well-funded high-tech textile fibre company on the verge of experiencing explosive sales take-off. In truth, we produced a lot of the new fibre products and literally give them to our customer to produce new fabric for marketing purposes, with the promise that we will not collect money until their products are sold. Nevertheless, we book these as receivables.

To the dismay of Mr D, my older colleagues had insisted on listing the company on the Hong Kong Stock Exchange, rather than the Singapore one, where Mr D has greater control on the process. They felt that the company would probably be accorded higher valuation in Hong Kong. Besides, they were not comfortable with Mr D’s influence in Singapore fearing the ultimate loss of the control of their company. Mr D went along grudgingly, helping to smooth the way to facilitate the IPO. We got a small investment bank to underwrite the IPO. The big ones were really not interested in this small piece of business. We went on to file the application to list to Hong Kong Stock Exchange, who was equally high-handed as Hong Kong was flushed with quality large size state-owned enterprises queuing up to list there. Being relatively uninterested in small size listing and more experienced in evaluating the quality of smaller Chinese private enterprises, they were quick to notice the sudden expansion of account receivables on our accounting statements. They followed up with a number of questions with the clear purpose of delaying our listing, probably to see how these receivables will behave given longer period of time. In short, there would be no quick IPO for us.

Mr D was quick to use this delay to his advantage. He hinted to everyone on the company board was that one of the reason for the stock exchange delay was due to the lack of a convincing younger manager helming the company, and that our senior colleague was already too old to project a “dynamic” image to the Exchange and the investors subsequently. He wanted me to be promoted to the CEO position while our existing GM to become the Chairman of the board. With his insistence, my appointment was pushed through the board, which made one of my older colleagues very angry as he was supposed to be the next-in-line in seniority. But heck, he should have spent some time learning English! Mr D, being truly worried about the age of the receivables on our book that would become increasingly dubious as days go by, pushed us to shoot for a Singapore listing where he feel, with his broad relationship will help a smooth IPO. This time round, my older colleagues obliged grudgingly. So we quickly filed an application to list in Singapore. It proceeded relatively smoothly and we went through an initial hearing very quickly. The market was in relatively stable conditions and we felt we could get the IPO proceeds quickly at the turn of the year. With lot of money, like Mr D’s famous words, a fake company can become real....... To be fair, ours was not really a fake company. We were just doing what the Chinese proverb describes: Accelerating the growth of the seedling by pulling it up a little everyday...... To our surprise, we got a letter very soon from the stock exchange questioning us the reason for the failure to disclose to them we had applied to the Hong Kong Stock Exchange earlier. They asked whether we had been rejected previously and on what ground we had been rejected. Just as we wonder how they found out so quickly since one could safely assume due to competitive relationship, these exchanges should not be talking to each other on micro matters like this, Mr D came storming in over-night. “Someone wrote a poison letter to the stock exchange”, so he explained. “Someone who knows the situation very well and who is not very happy with the whole thing”, he concluded. We were fortunate, he went on to exclaim, as he felt that given the Hong Kong Stock Exchange never really rejected our application, he could still salvage the situation using his relationship and influence. While there was no hard evidence, we nevertheless took the precaution of asking for the early retirement of the senior colleague who was passed over for the post of CEO as we suspected him to be the whistle-blower. We made sure he was well compensated in monetary terms as we thought that would sooth his anger, with promises to allocate more of the shares to him so that he would share our desire to see a successful IPO. Then we went on to reply to the stock exchange disclaiming the fact that we were previously rejected, citing our need to access capital markets fast as ours business was expanding rapidly. Hong Kong was just going to be too long a wait for us.

On the other hand, Mr D worked his network and “club of friends” to sooth the nerves of the exchange officials, who were working hard to promote Singapore as the “second board for China” The launch of “second board of China in Shenzhen” hit a snag when the National Peoples’ Congress decided that the Chinese investment public was still too unsophisticated to handle investing in non-State-controlled enterprises that even the Chinese government may not be able to police effectively. So after 3 month, we were informed that we manage to secure the final hearing. Mr D and some young lawyers and accountants spent a few days preparing me to handle the questions “correctly”. I saw the signs of satisfaction on the faces of the officials during the hearing. One of them even went on to comment on the fluency of my English...... Mr D was right again. My Chairman could have fumbled and rumbled on just like any other Chinese CEO during such occasions. They were just the hardworking mulls that built the foundation of the Chinese’s manufacturing might. I belong to the generation that would take the company to soar higher as we understand and speak the language of high-finance, in English! The battle to IPO was hard won. We got listed in 2004 and to our pleasant surprise, some of our customers came back to pay down the receivables and asked for more of our new chemical fibres. By now, China has become the “factory of the World” that churned out all kinds of consumer and industrial products so cheaply that the Americans and the Europeans were so addicted to. The stock markets and physical property markets in the world were becoming buoyant and everyone was beginning to feel wealthy and began to spend more. Our new fibre products found more commercial uses and we bought more machines using the IPO proceeds to produce more products to cater to the booming demand.

Again Mr D was right. Pour more cash into the business and you will get a real company.........just like the pig-farmers l! isted on the stock he put it. Sensing potential to make a lot of money out of the good performance of the company and the buoyant market conditions, Mr D descended into town one day and asked me out for a dinner. As usual, we headed to his favourite KTV after dinner. After a few drinks, he leaned over and whispered to me, “Hey, this is your chance to grow really big very fast. The IPO proceed was not enough to fund your growth. Now that we are listed, we can place more shares out to raise more money to accelerate the business expansion to capture more customers before the competitors in China could replicate our capabilities, which always happen in every industry and business in China.” I was reluctant to agree to help sell the idea to my old! er colleagues as their shares were still in lock-up period and I imagined they would hate to see any dilution of their interests further at this juncture. Mr D went on, “I really needed your help as I need to get the shares placed out to some of those who helped us through the difficult times just not too long ago. We need to let them make some money as we are entering a bull market soon. In any case, the issuance of more new shares will give us more power to cement your position as the number one man in your company as we all support you rather than your older colleagues.” As usual, we kind of half forced the issue through the board with my older colleagues grudgingly approved some kind of convertible issue to assuage their fear that the new institutional investor would not be able to sell before they were allowed to.

In Mr D’s effort to consolidate his hold of the board further, a new director from the institutional investor group was appointed to the board. I had known him earlier as one of those that visited our plant before the IPO, when Mr D was just beginning to restructure the company shareholding where this new director was once introduced to me as an “angel” investor. Apparently, they were good friends that “make money together”. By 2005, the Chinese economy had entered into another “boom era” and our business was literally flying, just like any other businesses in China. Profit margins were good while sales expanded quickly, and our share prices rose more than 3 to 4 times from the IPO price. Many of older colleagues sold their shares and retired happily into the sunset in 2006, only to regret to see the shares they sold almost doubled again in 2007. Being the new helmsman, I could not easily sell my shares as it would have been construed as management not having confidence in the business. By then, Mr D had become one of the richest men in Singapore. Leveraging on his experience and the capital he accumulated from earlier successful IPOs he conducted, where in some case he made more than 50 times his capital, he exploited his new reputation as the “preferred deal-maker in Singapore” to the maximum.

His “club” became increasingly larger as many people with money and “influence” joined the “club” to participate in this unprecedented “Chinese feast”. He doled out hot IPO share allocation through investment banks to repay old favour and to cultivate new relationship. Success begets success and money begets money. It all seemed so easy and so natural. Everyone got what they wanted. The Chinese companies got their money to expand their business (which at a later stage, no one is really sure which company really had any business to start with), the entrepreneurs were handsomely rewarded for the risks they undertook, the deal makers got their fees, the angels made their killings, the bankers collected their fees and dished out new loans, the lawyers and accountants recruited more young graduates to cope with the record work volume, the stock exchange got their “new mandate as the second board of the Chinese companies”, the investors got their hot-and-sizzling China concept stocks and above all, the rich and the influential members of the “invisible clubs” were all happily enriching their own pockets......

The reason why Mr D was successful, I realised, was that he always try to help the people who helped him in one way or another to become richer. Despite the fact that I could not sell my shares, I got the help of one of his banker friends to obtain some financing by securing my stake in the company to join in the biggest “Chinese feast in Singapore”. Just like all the Chinese entrepreneurs Mr D helped, I became one of his “angel investors”, taking stakes in promising new companies through his vehicles, got allocated hot IPO shares and reaped substantial gains within short span of time. I too, was becoming not only asset, but also cash rich. I took advantage of the Singapore immigration rule and got myself a per! manent resident by purchasing a property in Singapore. I wanted my son to study in the English school in Singapore and grow up as part of the establishment there. In any case, I would be able to help him join the “club” and he will be taken care of the rest of his life.

As for Mr D, he was purchasing properties in the form of “tracts of land” as he moved to diversify his assets from stock holdings to land holdings, with a sight to become a serious property developer. The Singapore property market was getting sizzling hot by the middle of 2007 and it seemed nothing could go wrong, particularly when 2 casinos were being constructed in an otherwise very conservative society. For myself, Mr D was going to be my role model. I went on to fund entrepreneurs and Chinese companies directly, hoping one day to bring these companies to someone like Mr D, and make more than the Singaporean deal-maker, at least equal........ Oh, I forgot to mention that the Chinese local stock market went through the roof as well. To take advantage of this, I needed no advice from Mr D. My friends in the local banks helped me secure the capital easily just like what they did for thousands of state-owned enterprise officials. They took the company’s cash as “invisible lien” to lend money to the managers of these companies to punt in the stock markets. The profits of such stock market speculation go directly into the pocket of the managers.

However, only in hindsight after the stock market collapse at the end of 2007 that it became obvious a lot of Chinese companies’ cash in the bank vanished into thin-air alongside the stock market bubbles. Our worlds began to unravel at the end of the third quarter of 2007. By then, the Sub-prime Crisis, as we knew it now, had hit the U.S. economy. We were still busy feasting in the spoilt of the capital market excesses, unaware of the impacts of such a crisis that originated from the housing bubbles in a country so far away. We were blind-sighted by the ease of making money from stock markets and at the peak of the markets in the middle of 2007, we all felt like the “masters of the universe”.

The first sign of trouble amongst the Singapore listed Chinese companies appeared when the share price of a Chinese steel company got sold off aggressively. In good times amidst a vibrant economy, this company presented to the investing community a story of their ability to turn in good profit margins by buying hot-rolled steel coils, coating them in zinc and sell them to car and consumer durable makers. One analyst, whom everyone ignored when the stock prices were rocketing, did question its business model as firstly, such production method is highly inefficient as most modern steel mills produce zinc-coated plates in one continuous process, and secondly, the investing world also knew that the prices of hot-rolled coils became excessively expensive as there was a preponderance of such downstream ! processing plants who got squeezed by the few integrated steel giants who have the capability to smelt iron-ore. Then there was the rumour of the company being privatised by a foreign steel giant seeking easy entry into the China market and its stock prices shot up before the trading of this steel company was suspended one day.

Rumour had it that it had been reporting fake profits, an official report of which the investing community is still awaiting after a few months. It was so obvious an insider job to cash out their position to the retail investors and apparently, the company management was not contactable anymore! By the second half of 2008, I believed many Chinese company CEOs were having tough times struggling to keep their business afloat amidst the most serious and swift crisis in memory as the credit situations around the world got frozen up. Worst, many of us were facing more serious issues in our personal finances. All our investments in stock and property markets were plunging in values amidst the so-called sub-prime crisis. Worse, we could not sell our stocks and properties as the transaction volume of these investments just vanished quickly together with the confidence of the investors globally.

While we busy feasted in the spoilt of the capital market excesses over the last 2 years, we did not realise that we were piling on quite a fair bit of leverages as we secured our investments for more bank loans to attempt to reap more profits, when it all seemed so easy. We never thought we could have any problem of repaying any of our borrowing as we were sitting on a lot of gains on our investment holdings. There was only one easy way out for all the Chinese company CEOs and that was to dip into the honey jugs. We all understood the importance of having our closest allies to be the finance managers of our companies so that any small “problems” could always be ironed out. In this case, I just “borrowed” some cash from the company accounts to fill some of the “margin calls” from the banks outside of China, which financed my “investments” in the stocks listed on Singapore Stock Exchange, as these foreign banks were ruthless in coming to seize the underlying security when the “margin calls” were not met. In some cases, I just pledged more of my personal assets to the foreign banks. I was becoming very stressed by all these happening and was not sleeping well.

Mr D was not having a good time either. He too was suffering from exactly the same problems as we were just emulating his investment styles and leveraging activities. I heard of incidents where he turned to some of other more cash-rich companies that he invested in to “borrow” some cash to bridge through some “margin calls”. He sold down quite a fair bit of his investment holdings to some “friendly hands” in a series of stock placements. At this moment, the goodwill and friendship he built over the years came to his rescue in these moments of “illiquidity” as the market transaction volume just dried up almost completely. However, the market prices of the stock holdings we used to secure our financing continued to drop by the days. Some of our friends and fellow “angels” were selling their holdings........and may just be in the same kinds of troubles as well. No one trus! ted each others at moments like these. Those that were selling their investments would not pre-warn their “fellow investors” as everyone would rush to sell at the same time! It was a time where everyone was for himself! My anguish did not escape the attention of the “director” on our board that Mr D posted in earlier. He flew over one day and was visibly concerned about the situation of my finances and of course, more importantly, that of the company. He sensed troubles as he knew that I too, had quite a fair bit of personal investments that were vanishing into the thin air in values.

By now, at the end of 2008, I was becoming desperate. Our company was going into the “audit season” and obviously, there was a large cash deficit that we would not be able to explain to the auditor. In the past, we could have just “arranged” for some cash to be credited into the bank account for a brief period to satisfy the auditors’ check. However, there was no such “temporary cash” to be found at any price as the sub-prime crisis had now developed into a full blown credit-crisis around the world. China was not spared in the process. With no where to turn to and the audit dateline closing in, I took the risks to “brief” the director of the true situation and asked for his help. I was surprised that he was not shocked by my confession. He had probably guessed it! In any case, the director asked me to remain calm while he would consult Mr D to seek some kinds of new financing to help bridge this difficult period. He asked that everything remained confidential as the last thing we wanted the world to know was the “missing cash” in the company accounts. H told me that quite a number of the S-chip CEOs were on the same boat and some of the “funds” that used to backed their IPOs have been able to extend some credit directly to them ease the pressure from the foreign banks, secured by again, stock holdings of the CEOs. Little did he know that my assets had almost been entirely secured by all kinds of creditors already!

Then the irreparable damage struck. I had borrowed some money from the local Chinese banks to punt in the local stock markets. The arrangement was such that I had to return such cash to the Chinese banks at the end of the year because they too, were subjected to annual audit. I had carefully maintained sufficient cash in our company accounts, which served as the “collateral to the conscience” of my friends in the Chinese banks. As I began to use them to fund the “margin calls” of the foreign banks and the amounts got further depleted by operation losses of the company amidst the worst economic crisis the world was now facing, my “friends” in the local Chinese banks were not going to take a chance on their own fate. They were definitely not “friends in need”. They simply deduct the amount I owed personally from our company accounts two days before their auditors came in, w! hich was of course, a few days before our company auditors came in. The rest was history...................

The auditor, which was an international firm, was not going to take a chance with their reputation. They formally informed our board of directors in early 2009. In other words, they were warning the board that the financial statements they were going to publish would be “disastrous” and could cause a serious enquiry by the regulators. I think some insiders proceeded to sell some of their shares before any official announcements were made but most of us were warned not to do anything with our holdings as that would be considered “insider trading”. Of course, all my older colleagues and company directors hated me as a consequence. I was asked to absent myself from all their meetings as they attempted to come up with a solution before the mandated result announcement date stipulated by the Stock Exchange. I was very scared. I had no one to turn to as even Mr D had stopped answering my phone calls. Everyone was trying to distance himself from me and it became obvious that I was going to be the “scapegoat”.

To protect myself, I seek the advice of some lawyers in China who in turn, consulted their friends in Singapore. To my relief, I was advised that should I be found guilty in the Singapore courts for misappropriating company assets, there was no established bilateral treaty as yet for Singapore court to extradite me from China. The China Securities Regulatory Commission, the securities regulator in China, had never once recognised their responsibility to regulate the S-chip companies listed in Singapore. In fact, the Hong Kong Stock Exchange had faced similar issues for decades in their attempt to regulate the P-chips, which were Chinese private enterprises listed on Hong Kong Stock Exchange, to no avail. In other words, as long as I refrained from stepping my feet on Singapore soil, nothing could be done to me. In any case, I thought given the hatred I faced from all my older colleagues and friends in the hometown, I should be taking some long overdue holidays. I relocate my family to a Chinese seaside town.

Although I was now an ordinary citizen, I was glad that my wife kept quite a far bit of the money I gave her along the way and that should be enough to last us a life time, at least in China. Through internet, I came to know that the company finally disclosed the incident to the Stock Exchange and the stock was suspended. They appointed an investigator but I was no where to be found. So it would be interesting on how the story could turn out post the investigation report. In fact, a number of S-chips suffered from the same problems and were suspended from trading soon after us. Inevitably, there were cases of over-stated revenues, fathom receivables, missing cash, over-leveraged financial positions of the founding entrepreneur who mortgaged away their own stocks, as well as outright manipulation of stock prices. In many cases, I suspected the irregularities had begun right from the very beginning, before the companies were even listed. Many were not real companies at the first place. My friends in the know told me that a few more had been discovered as suffering from “missing cash” and jokingly commented that the Exchange had to arrange for a smooth sequence of announcements just like the way they schedule result announcements of listed companies. With all these irregularities exposed and more promised to appear, the stock prices of all S-chips have literally collapsed. All my friends and their “club members” must have suffered tremendous losses. Some dealmakers and their syndicate members apparently were facing margin calls on daily basis and some even declared themselves bankrupt. It must have been a very trying period for everyone. However, I did not seem to have much sympathy to all these people. I witnessed how some of them became filthily rich in a short span of time without having to work hard, while other enjoyed a good ride in fortune just because they (or their friends or relatives) were in position of influence.

I was the only one that would be made a “scapegoat” and had to live a life of “exile”, while these guys could still just lick their wounds secretively and continued on with their life. I do not sym! pathize those institutional investors who lost their money as if they did, they were simply either incompetent or someone had benefited personally along the way in having committed their funds’ money in such investments. Curiously, I wonder who will speak on behalf of all the many ordinary people in Singapore who came to believe the investment potential of these S-chip companies after all the beautiful “packaging” the dealmakers and entrepreneurs wrapped around them, and went on to invest their life savings in the S-chips, only to find out one day that all these were worthless! So when dust finally settles one day, we shall all look back and evaluate what had gone wrong and who are to be blamed. I am sure all fingers will be pointing at the Chinese entrepreneurs such as myself, who are usually labelled as “greedy and unscrupulous”.

There is a ring of truth to that accusation and I admit I am guilty. But how about those dealmakers, who taught us how to cook the books? How about those angels, who hid their identities behind some dealmakers and exerted influences to assist them to succeed in their schemes? How about those institutional investors who trifled with the money entrusted to them? How about those intermediaries and professionals who were not vigilant enough to protect the interest of the investing public? I would like to end with a comparison. The Ming Dynasty collapsed only after the General (Wu San Gui) they sent to defend the border against the Manchurians opened the gate voluntarily to allow the Manchurian’s army to come into the Great Wall. General Wu did that probably out of a promise to be made a king later on and be endowed tremendous amount of riches by the Manchurians. Of course, the historians would like to add that he also needed the help of the Manchurians to defeat another general that had taken his favourite concubine. In short, the thieves and robbers are only usually allowed in by the insiders..........

If you have read the story till this part, I am sure you are either a victim or someone who is deeply interested in the development of the S-chips going forward. Please help to forward this email to any many such interested parties as possible. We need to put an end to all these irregularities lest more ordinary people on the street suffer unnecessary losses. In the process, you will help me to partially clear my name...... For I am not the only one to be blamed.................


1. Not everything is true in this story that I have just presented in order to protect some friends that still remain friends. In particular, the story before 1995 was inserted in only to give you a perspective of the difficulties that most Chinese entrepreneurs went through, and how they eventually all came to resent the ease and ruthless manner in which people like Mr D made great fortunes leveraging off their hard work.

2. At the same time, I sincerely hope that the investigation report that was pending in the case of my company comes out being at least “fair” to me. Otherwise, the more “real truths” will follow in subsequent emails......... hahahaha, the power of internet........

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