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Thursday, 22 April 2010

Global Palm Resources Holdings Limited

Golden Palm Resources Holdings Limited launched its IPO for 110 million new shares at $0.46 each. A pathetic 3m shares will be available for the public while the remaining 107m shares will be via placement.

The company is a producer of crude palm oil and palm kernels in Indonesia and its prospectus boasted that it has access to land banks suitable for future cultivation of oil palms.

Revenue in FY 2008 was Rp 267.7 billion (S$38.6m) and net profit was Rp 70 billion ($10.7m).  For the 9 months ended 30 Sep 2009, the revenue was Rp 2222.5 billion (S$30.6m) and net profit was Rp 144.4 billion (S$19.8m).  EPS for the 9 months adjusted for post IPO shares of 412.968m shares was 4.82 cents. Somehow it seemed odd that the company showed a 9 months profit in 30 Sep 2008 of S$22m but the profit dropped to S$10m by 31 Dec 2008. Seemed like there are last minute late adjustments / losses to the accounts in Q4 2008. Assuming that was a one time off adjustment in 2008 and that 2009 EPS for full year is a 'conservative' 5.28 Singapore cents, the company is listing at a PER of 8.7x.  The NAV per share post IPO is 26.7 cents, a 42% discount to its IPO price, thus investors have to note that they are paying a premium to the net book value of the company (which frankly, it is very difficult to value biological assets).

The market cap will be around $190m and the IPO will close on 27 April 2010 at 12pm.

Compared to its other peers like Indoagri, Wilmar and Kencana Agri, it seemed likes this IPO is priced to sell. However, Golbal Palm is not as established and well known that its other peers and is much smaller in terms of revenue.  A fair value PE of 10x-12x assuming unchanged EPS for 2010 will mean a price range of 52 cents to 63 cents. However, the recent listings so far have been fairly disappointing and looking at recent trend, it seemed to fluctuate within a plus/minus 10 percent range.  Personally, with only a 3m public float, the chances of getting it will be low and with such a low profit range, i would give this a miss if i am punting the IPO. I would prefer to stick to better names like Wilmar and Indoagri if i want some exposure to the palm oil sector.

Saturday, 10 April 2010

Tiong Seng Holdings Limited

Tiong Seng Holdings Limited ("TSH") is offering 189m New Shares (finally i see someone that is not selling vendor shares!) with 15m shares for the public and 174m shares via placement at 28c each. TSH is principally engaged in building construction and civil engineering in Singapore as well as property development in PRC. As of 17 Feb 2010, its order book for construction and civil engineering projects is estimated at S$953 million.

Its revenue grew from $132.8m in FY2006 to $272.3m in FY2008.  For the first 9 months to 30 Sep 2009, its revenue was $301.7m versus $200.8m in the same period till 30 Sep 2008. The net profit somewhat fluctuates from $9.7m in FY2006 to $10.3m in FY2007 and $9.3m in FY2008.  However, for the first nine months till 30 Sep 2009, the net profit stands at a staggering $29.2m. It seemed that most of that profit is driven by the more profitable property development projects which can be lumpy at times. Assuming Q4 show a conservative profit of $5m, the full year net profit will be $34.2m. That translate into an EPS of Singapore 4.53 cents based on the enlarged share cap. At the IPO price of 28cents, it is equivalent to a PER of 6.18x. Without doing any due diligence on my numbers, assuming the company is able to sustain its profit growth by 25% for FY2010, that will translate into an EPS of Singapore 5.66 cents and at a PE range of 5-7x, the fair value will be $0.28 to $0.40. At the IPO price, its market cap is $211.1m.

The offer will end on 14 April 2010 at 12pm and starts trading on 16 April 2010 9am. There are over-allotment and stablisation action allowed for this company. Which is good if the demand is good. So far, the track record of DBS for the last 12 months have been fairly impressive as they are more selective ín terms of IPO mandates and less aggressive in terms of IPO pricing, leaving some meat for retail investors. Usually you will be able to get out on the first day at a profit. Even the 'worst performing IPO by DBS'', Sin Heng is only down 6% as of Friday's closing and most IPO punters would have been able to 'get out' safely on the first few weeks. (Tiger Air and PEC are doing well and Cache Logistics likely to do well too). I can't say the same about recent IPOs mandated by UOB Kay Hian though (lets see how Debao versus Cache debuts on monday. The Qingmei IPO was a huge disappointment).

While personally I dont really like the construction sector stocks, i think traders/investors who are in for a punting mood can still try their luck on this counter, especially when you know that there are no pre-ipo investors cashing out on you and that your IPO proceeds is not being used to enrich them.
Its future plans include increasing construction business in core markets, establish a pre-cast factory and expaning buisiness in China.

Friday, 9 April 2010

China Minzhong Food Corporation Limited

China Minzhong Food Corporation ("CFMC") launched its IPO by selling 119.602m new shares and 77.742m vendor share at $1.20 each. 9.867m shares will be available for the public while the rest will be through placement. The IPO will end on 13 April at 12 pm.

CFMC believed that it is the leading vegetable processor in China. It is also one of the few integrated vegetables processing companies with its own cultivation bases.  Its key products can be broadly classified into processed vegetables or fresh vegetables produce.

CFMC's revenue grew from RMB 445m in 2007 to RMB 1,058m in 2009. During this period, the net income grew from RMB 119m to RMB 288m. For the year ending 30 Sep 2009, the revenue was $224.6m and net profit was $61.2m. Based on the enlarged share cap, the EPS for FY2009 was $0.11. At the IPO price of $1.02, the company is listing at a historical PER of 9.3x. The IPO proceeds will be used mainlyto increase production and cultivation capacity. The NAV per share post IPO will be $0.65

The market cap based on the IPO price will be $645m and there will be over-allotment as well as stablisation action performed by JPM.

Pre-IPO investors came in at various prices, ranging from 18c to 72c. The more prominent ones are : Tetrad Ventures (aka GIC) at 28c, CMIA Funds (aka as the manager who was brought down by Ferro China) at 18c, OCBC Capital at 72c. Prudential Asset Managment is the public corner stone investor and has subscribed for 25m shares and Fidelity HK is also a cornerstone investor subscribing for 6.67m shares.

This is an interesting company as it is one of the first of this kind to be listed here.  If not for the fact that GIC is an investor, the company would probably have tried to list in HK.  It is listing at a fair PE mulitple of around 9.3x.  Assuming earnings went up by 25% in FY 2010 and a fair value range of 9x to 12x, the EPS will be $0.1375 and the Company's fair value will range from $1.24 to $1.65.

Given the fact that GIC has invested, it lends some 'credibilty to the operations and given the fact that this is one of the bigger IPO to be listed here, it will command a premium over its other China listed S Chip. With JPM acting as stablising manager, the selling pressure on the first week should be well absorbed and the IPO is worth 'a stag'.

However, the fact that many pre-ipo investors are PE funds, it is likely to face some selling pressure when the moratorium is over in 6 months time.

Thursday, 8 April 2010

Cache Logistics Trust

Cache Logistics Trust ("CLT") is a Singapore-based REIT established principally to invest in income-producing real estate used for logistical purposes in Asia-Pacific. CLT's initial portfolio of properties comprises six high-quality logistics warehouse properties located in Singapore.

The properties under Cache Logistics Trust (CLT) will be leased to CWT Ltd. (CWT) and C&P Holding Pte. Ltd. (C&P) under master lease agreements. The leases will have a weighted average lease expiry (by GFA) of 6.4 years, with locked-in annual rental escalations of 1.5% per annum for the first five years of the initial contracted lease term.

CLT is granted a right of first refusal (ROFR) by CWT and its substantial shareholder, C&P, to acquire logistics properties in the Asia Pacific region owned by or offered to CWT and C&P. It is interesting to note that this is another "listed company"trying to hive off its assets into a REIT/Trust, the other list cos that have walked down the same path includes, Hyflux, Capitaland etc.

CLT does not have a credit rating as yet that limits the maximum allowed gearing to 35%. There is still some room for debt funded acquisition as CLT's post-IPO gearing would be 26%. While management views that 35% gearing as a comfortable level, it is open on getting a credit rating to raise its allowed gearing level to 60% should a suitable acquisition opportunity arise. There is also potential for capital appreciation if the trading environment in Singapore continues to recover and cap rates for industrial properties fall.

Based on forecasts found in CLT's prospectus, its IPO is priced at a DPU yield of 8.7% and 8.8% for FY10F and FY11F respectively. This is higher compared to peers such as Ascendas REIT (AREIT SP) and Mapletree Logistics Trust (MLT SP), which trade at consensus yields of 6.9% and 7% respectively for FY10F. IPO investors will be paying for CLT units at a price-to-book (P/B) ratio of about 1.0 vs. AREIT and MLT units currently trading at P/B ratios of 1.2 and 1.0 respectively.

The IPO is attractively priced with a reasonably attractive yield. Investors would do well to subscribe to this counter. Assume CLT heads towards "yield equalisation of 7%", the fair value of CLT will be $1.09.

Debao Property Development Ltd

My apologies to all readers here. Just came back from overseas and i thought i could get a picture of the IPO booth today (saw it yesterday) but interestingly, they dismantled the IPO booth before the IPO closes! The IPO close on 8 April 2010 at 12pm.

Debao Property Development Ltd is an integrated property developer in Foshan City, PRC. The company is offering 138m shares at 43 cents each comprising of 125m New Shares and 13m Vendor Shares. 1.5m shares will be via public offer and 136.5m shares via placement. The vendor shares are sold by pre-ipo investors and the list is rather long (comprising many individuals and BVI companies). Pre-IPO investors are getting in at 50% discount to the IPO price and that translate into a price of 21.50 cents. Pre-IPO investors still hold a chunky 27.54% post IPO and the share price is likely to face selling pressure once the moratorium is over.

The IPO proceeds will be used for existing property development projects, acquiring new sites and for working capital. The market cap based on enlarged 1.125m shares is $483.75m and the adjusted NAV per share post IPO is Singapore 20.23 cent. In this aspect, at 43 cents, investors are paying a high premium over its net worth (more than 112%).

Revenue was RMB 136.6m in FY 2008 (a drop of 54% over FY2007).  Net profit dropped to RMB 2.7m versus 111.97m in FY 2007 (a drop of 97.5% over FY2007). For the 1H 2009, revenue was RMB 202.67m and net loss was RMB 16.1m

I am not going to spend too much time and effort on this company as I believe investors are better off not buying the IPO. The company is too 'concentrated' in Foshan and the Chinese government is keen to rein in prices in the booming property sector. The overhang in shareholders post moratorium will also not be a good sign.

Give this IPO a miss.

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