Sin Heng Heavy Machinery Limited

Sin Heng Heavy Machinery Limited ("SH") is offering 168m shares (comprising 88m New Shares and 80m Vendor Shares) for its Initial Public Offer at 26 cents each. The IPO will close on 1 Feb 2010 at 12 pm.

SH is one of the leading lifting service providers in Singapore, focusing on the mid-to-high lifting capacity segment. It has two core businesses, one involving the rental of cranes and aerial lifts and the other involves the trading of bo new and used cranes and aerial lifts.

Revenue grew from $82.7m in FY2007 to $137m in FY2009 and net profit grew from $9.2m to $22m during the same period. Assuming the service agreement is in place in FY2009 and based on the Post-IPO shares of459.64m shares, the EPS will be 4.74 cents.

Based on the IPO price of 26 cents, the market cap is $119.5m and the Company is listing the valuation of 5.48x. One of its listed peers on SGX,  Tat Hong is currently trading at 7.2x but Tat Hong is a much larger more profitable rival and thus a higher PE is justified.

Sin Heng is a Private Equity-backed company and is majority owned by PE funds. While the current shareholder is partially cashing out at this IPO, DBS is being appointed as a stablising manager post its listing.

Assuming the EPS for FY2010 grow by 15% and PE valuation expands to 6 to 8x, that will imply an EPS of 5.45 cents and a fair value of between  a fair value of 32 cents to 43.6 cents. Unfortunately, current market conditions are taking a turn for a wost and the IPO window may be closing soon!The fact also remains that the main shareholder is a Private Equity Fund means that selling pressume will resume once the moratorium ends.