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.