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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.

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