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Saturday, 23 October 2010

Oxley Holdings Limited

Oxley Holdings Limited is offering 224m New Shares at $0.38 each by way of placement for a Catalist listing (that what is the point of having an IPO booth?).  The Company is a property developer specializing in residential cum commercial developments. The Company intend to distribute at least 50% of its net profits as dividend in FY2011, at least 30% in FY2012 and at least 20% from FY2013-2015. (wow this is the longest commitment for a dividend payout policy i have ever seen). The offer will close on 27 Oct at 12pm (but not for public). The market cap will be $565.8m (much bigger market cap than some mainboard listed companies....)

The company did not disclose its revenue line but its net profit after tax for year ending 30 June 2010 is a paltry $549k. EPS based fully diluted basis is Singapore 0.04 cents. That translate into a historical listing PER of 875x which appeared to be "expensive" but we will need to know what is the projected earnings stream coming on in FY2011. The NAV per share (post IPO) is 8c versus what investors are paying for 38c! Pre-IPO investors paid 21.3c. The owners and pre-ipo investors controlled 85% of the company post IPO and will be under moratorium. As you can visualise, the stock will be tightly controlled and as in most Collin Stewart's IPO, the prices post IPO will be 'well managed'.

Personally, my gut view is that the counter is overpriced with possible consolidation in the property sector in the next few quarters.  But since this offer is "by invitation"only, most probably the invited guys will be privy to more detailed prospects/earnings than what we can skim from the prospectus. This counter is for investors who like niche property developer exposed to the Singapore-property sector but certainly not for me.

Wednesday, 20 October 2010

XinRen Aluminium Holdings Limited

XinRen Aluminium Holdings Limited is offering 198m New shares at $0.55 per share where 186m shares will be via placement and the rest for the public (12m).  There will be over-allotment option and DBS will be the stablisation manager.  The IPO will close on 25 Oct at 12pm. The Company has 3 business divisions, namely Smelting, Fabrication, Trading and Marketing. It is a leading producer of primary aluminium in the PRC. The IPO proceeds will be used to increase the capacity (55%), strategic investments (15%)  and working capital (30%). The market cap implied by the IPO price is S$604m.

From FY 2007 to FY 2009, revenue grew from RMB 3.3 billion to 4.26 billion and net profit flucutate from RMB 142.9m to RMB 306 million during the same period. For the 3 months ended 31 March 2010, revenue grew by 123.3% ro RMB 1,269.1m and net profit touched RMB 150.3m versus a loss in the same quarter in prior period. In Singapore dollars term, the revenue for 2009 was S$852m and net profit was S$61.2m. The EPS for 2009 based on fully diluted shares post IPO will be Singapore 5.6 cents. That translates into a historical PER of 9.8x.  

If you remember, Ferrochina fell under its debt. As of 31 Aug 2010 adjusted for IPO proceeds, Xinren has S$124.8m of cash, debt of S$407.7m and equiy of $226.5m. Investors would do well to watch the debt levels of this company closely in case there is any refinancing risk for its loans and the "joke" is that the all the loans and borrowings are classified under current liabilities. In other words, if the banks want to withdraw their facilities, they would have difficulty repaying the debts! In addition, short term loans usually bear a higher interest rate that long term loans, the company would do well to 'refinance' its short term borrowings into loans with longer term tenure that has a lower interest rate!

The NTA per share as of 31 March 2010 (assuming IPO proceeds is received) is $0.19 per share and that translate into a price-to-book ratio of 2.89x. Looking at the comparables listed in HK (Aluminium Corp of China and China Zhongwang Holdings), they are trading art forward 2011 PE of 25x and 5x and PB of 1.86x and 1.67 respectively. Assuming EPS grow by 20% in FY2010, the EPS will be Singapore 6.72c. (This prospectus is "tough to read". The information is all over the place). At 15x PE, the fair value of XinRen will be around $0.84. This will be a hit-and-run counter for me unless the company can address some of the concerns i have.

Tuesday, 19 October 2010

Mun Siong Engineering Limited

Mun Siong Engineering Limited ("Company") is offering 107m New Shares at $0.20 each where 2m shares will be for public and the remaining 105m shares via placement.  The Company is an integrated mechanical engineering and electrical and instrumentation service provider for the Process Industries and its major customers are the petroleum majors, petrochemical companies and multi-national EPC contractors.

Revenue increased from $26.2m in FY2007 to $67.7m in FY2009 and net profit before tax rose from $1.7m to $9.8m in the same period. Q1 2010 show a revenue of $14m and net profit of $2.1m.  The offer will close on 20 Oct at 12pm and will commence trading on 22 Oct.  The EPS based on post-invitation shares for FY2009 is 1.94 cents and that translate into a historical PER of 10.3x. The NAV per share (taking into account the IPO proceeds) will be around 8.38 cents. The market cap is around $83.34m at the issue price.

The comparable bigger EPC sompanies like PEC and Rotary are trading at less than 10x forward PEs. In this regard, for this small cap company, it is really priced on the higher side that is trying to list amidst positive IPO sentiments. The only good thing is that the company is raising funds by issuing purely new shares for growth and no pre-ipo vendors trying to flip and make a quick buck. Unfortunately there are better EPC companies trading a cheaper valuation and other than the low price per share of $0.20, i don't see many compelling reasons to invest in this company for the long term.

Saturday, 16 October 2010

Is multiple applications for IPO permitted?

I think many investors were asking this question on whether multiple applications are allowed for IPOs. The answer is - it depends usually on the size of the issue. 

For small IPO issue where they have trouble attracting the 'minimal' 500 or 1,000 shareholders, multiple applications is strictly not allowed. This is because the IPO issue manager is trying to ensure a reasonable spread among investors such that they are able to fulfill the minimum number of shareholders listing requirement. 

For big IPO issues such as Global Logistics or Mapletree Industrial Trust, they have no issue or problems attracting and meeting the minimum shareholders requirement. In such IPOs, you can still apply at the ATMs using CPF or Cash even though you are already allocated some shares under the placement tranche. This is because during the book-building exercise, the issue manager already know that they have met all the listing requirements, especially the minimum no. of shareholders requirement.

Hope this answer the query you have. For avoidance of doubt, do consult your remisier or broker but of course, the 'never do homework' ones will not be able to advise you properly. Happy IPO investing.

Friday, 15 October 2010

Anchun International Holdings Limited

Anchun International Holdings Limited (“Anchun”) is offering 130m shares at $0.28 each where 105m are new shares and 25m are vendor shares. 2m will be for the public and the rest via placement. The IPO will close on 21 Oct at 12pm. The Company is a leading integrated chemical systems engineering and technology solutions provider to PRC petrochemical and chemical industries, In particular, manufacturers of ammonia and methanol based products. The company was awarded the 2009 Forbes China Up * Comers award by Forbes China magazine.

Revenue grew from RMB 114.8m in FY2007 to RMB 294.8m in FY2009 and net profit grew from RMB 38.4m to RMB 75.2m during the same period. Assuming the service agreement is in place in FY2009 and based on the post IPO shares of 505m shares, the EPS will be RMB 14.6c or approximately Singapore 2.93 cents. That translate into a listing PER of 9.56x. The market cap based on the IPO price is S$141.4m.

Looking at the pre-IPO investors, you can see a familiar name Ma Ong Kee, who get in a very cheap price. Let’s see if he can do some magic to this counter. China XLX, a company listed on HK and Spore is another pre-ipo investor in this counter.

Assuming the company can grow at a conservative 25%, the EPS will be 3.7 Singapore cents and that translate into a forward PE of 7.56x. The company reminded me of an old S-chip favorite that has fallen out of favor. Jiutian Chemical. Ring a bell? Anyway, the public float will be small, only 2m, so getting it will be tough. Looking at current sentiment, just treat it as a apply-and-sell type (stag) and you should be fine but don’t fall in love with it.  

Monday, 4 October 2010

Mapletree Industrial Trust

Mapletree Industrial Trust is offering 594.9m units at $0.93 per unit. DBS and Goldman Sachs is the joint global coordinators and together with Citi and SCB act as the underwriters as well. The company is poised to be one of Singapore's largest listed REIT with an initial portfolio of 70 properties valued at $2.1 billion on 31 Aug 2010. The properties are spread all around Singapore.

The "annualised" yield for FY2010/2011 is 7.6% and projected to grow to 8.0% to FY2011/2012. The IPO will close on 18 Oct at 8am. The placement tranche of 488.7m was overwhelming subscribed and cornerstone investors took 322.6m shares! Luckily, they have a big public tranche of 106.1m for the people in the street. The company will have a market cap of $2.09 billion. For the year ended 31 March 2010, the REIT has a revenue of $178m and a net income of S$86.7m.

The cornerstone investors are APG, AIA, Henderson, Columbia, Shaw and Prudential. The NAV is S$0.86 and the IPO represents price-to-book premium of 1.08x.

The peers include Ascendas Reit (6.19%), Cambridge Industrial Trust (8.92% closest comparison?) etc but for convenience, i will group it with the logistics Reits such as Mapletree Logistics (6.86%) as well. From bloomberg, the peers are trading at between 6-8%.

Again, MIT managed to priced itself at the higher end of the IPO price range due to overwhelming demand. I would consider this REIT as a better buy than Global Logistics (since both are launched around the same period). Assuming a yield compression to 6% before investors switch out to other Reits with better yield, the possible price will be around  $1.18 to $1.24 and that represents a more than 20% upside. Hopefully it will not benchmark itself to Cambridge valuation. Happy investing...

15 Oct - they ran out of prospectus...

Global Logistics Properties

Global Logistic Properties launched its IPO at $1.96 per Offering Share. According to sources, the demand from institutional investors were hot, as such, they ended the book building period earlier than expected and priced it at the high end of the range (which to me, means that the counter is likely to be fairly priced and has a much lower margin of safety). The company is offering 1.07 billion shares via placement and 102.3m shares via public offer. Cornerstone investors have subscribed for approximately 589m shares but has no moratorium. Investors may apply for the IPO using their CPF monies. The offer will close on 14 Oct at 10am and list on 18 Oct and the offer is subject to over-allotment as well as stabilization by the manager.

The prospectus states that the Company is a market leader in modern logistic facilities in China and Japan (why Japan? i wonder. I guess they have to package it nicely to offload the under-performing but mature Japanese properties???)

Revenue rose from US$250m in FY2008 to US$412m in FY2010 and according to the prospectus, China economic and demographic conditions will drive demand for logistics facilities while Japan will provide a stable cash flow. For the year ended 31 March 2010, the Company incurred a profit of US$240m before a drop in fair value of its properties by $369m resulted in a net loss of $149m for the year.  However, for the 3 months ended 30 June, the company made $116.4m before fair valuing its properties upward resulted in a net profit of $500.6m for the same period.

The IPO is fairly priced at a slight premium to its book value, i.e. approximately 1.086x its book value. This is one of the mega IPO in Singapore for 2010.

Without considering any fair value changes to its portfolio, assuming a pro-rated profit of US$465m and a USD/SGD rate of 1.30, the implied EPS will be Singapore 10.68 cents and at the IPO price of $1.96, it translate into a forward PE of 18.35x

The top guys in this Company (Jeffrey Schwartz and Mr. Ming z Mei will make about US$2m a year each before share bonus while the top management team of 4 others will draw at least S$ 3.75m in total.

The cornerstone investors include, National Social Security Fund of China, CBRE GRES, Chow Tai Fook, Peter Lim Eng Hock, ING Clarion Real Estate, Lion Global Investors, Nan Fung Group and Owl Creek.

Conclusion:  The IPO is fairly priced (but not aggressively overpriced), i believe the company is poised to grow even bigger in the coming years and the IPO proceeds will be the catalyst and the bullets it will need. The 'fair value' accounting of its properties will, without doubt, bring uncertainties and volatilities to its earnings. With stabilization manager and overwhelming demand, investors should have no problems 'stagging it' on its first day but i will drop the 3 chillis rating to 2 as it is priced at the higher end of its IPO range.

Yamada Green Resources Limited

Yamada Green Resources Limited “the Company” is offering 30.08m Vendor Shares and 74.9m New Shares of which 2m will be via public and the rest via placement.  The shares are priced at $0.22 each. The IPO will close on 6 Oct at12pm.

The Company is a major supplier of self-cultivated shitake mushrooms in Fujian Province PRC and operates one of the largest cultivation base there. Its products are broadly classified into mushrooms or processed food products.

Revenue grew from RMB 73m million in FY2007 to RMB 236.2m in FY2009 and net profit after tax grew from RMB10.4m to RM81.7m over the same period. The net margin improved from 14.2% to 34.6% during this period. The unaudited 3M 2010 revenue grew by another 63% and net profit grew  by 85% respectively over the same period in FY2009. 

Post IPO, the company intends to expand its cultivation base, expand its eucalyptus plantations and establish its own distribution and marketing network. There will be 406.6m shares post IPO, i rather they issue less shares and priced it higher. I guess the IPO managers are still of the view that investors believe "lower priced" China shares are 'better' as the down side risk is 'lesser'. I rather they be more confident in this regard. 

Based on the post IPO no. of shares, the company is listing at a historical PER of 5.23x (assuming the service agreement is in place in FY2009 based on the post-IPO shares). The market cap will be $89.45m.

Assuming the net profit increased by more than 50% in FY2010, this means the net profit will be RMB 122.5m. This will translate into a EPS of approximately 6 Singapore cents. Based on the IPO price of 22c, it is priced at a prospective PER of 3.67x which is very 'cheaply' priced.

Sinograndness (another listed S-chip in button mushroom) is trading at around 6.2x PE. Assuming Yamada trades at 5-6x prospective, it will translate into a fair price of 30-36c. But a few push back factors will be the vendor share sale and huge float. It will likely be another hit and run story. 

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