TTJ Holdings Limited

TTJ Holdings Limited is offering 15m shares for public and 95m placements shares at $0.20 each.  The company is one of Singapore's largest independent structural steel fabricators and also operate 2 dormitories in Singapore.

The financial year ends on the 31st July. From FY2007 to FY2009, the revenue grew from S$64.6m to $138.1m.  Net profit fluctuates from $9.2m in FY2007 to $13.2m in FY2009. The directors intend to distribute 20% of its profit after tax as dividends for the FY ending 31 July 2010.

The application of the IPO will close at 12pm on 30 March 2010 and will commence trading on April Fool's Day, 1 Apr 2010. The market cap is $70m based on the IPO price and is listing at historical PER of 5.25x based on the enlarged share cap.

The main use of the proceeds will be $10m for expansion into the business of strutting business and $4m for the construction of a new fabrication facility in Middle East.  (My view:  Amazing why the company is still going to Middle East where the construction boom has likely ended with many companies mired in debts). 

The company also had a generous "profit sharing" scheme whereby the executive officers and the CFO will share 6% of the PBT and the CEO has a separate profit sharing scheme of at least 2% PBT. With no minimal profits to be attained before the scheme kicks in and with a friendly board of directors, my personal view is that the scheme is quite generous and unlikely to be challenged going forward but hopefully it will bring the company to greater heights. Just for illustration if the scheme is in place since inception, if the FY2009 profit before tax is $15.812m, the 5 executive officers and CFO will share $948,720 and the CEO will get $522,480.

While the IPO is cheaply priced, looking at the most 5 recent IPOs where the share price tanked below the issue price, it will require some effort for the share price to remain above water. I would give this a miss.