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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.

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