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Tuesday, 22 February 2011

Dyna-Mac Holdings Ltd

Dyna-Mac Holdings Ltd ("Company") is issuing 436m shares (186m New shares and 250m Vendor shares) at $0.35 each. 5m shares will be via public offer and 431m shares via placement. The Company has also provided for up to 30m shares under  an over-allotment scheme.  The application will end on 28 Feb at 12pm.

The Company is a multi-disciplinary specialist provider of detailed engineering, procurement and construction services to the offshore oil & gas, marine construction and other industries. Revenue and net profit has been swinging from FY2008 to FY2010. I believe this is in tandem with the demand for oil & gas. Revenue for FY2010 comes in at $218.5m and net profit was $25.5m. HY2011 revenue and net profit came in at below HY2010 by more than 20%. Assuming the full year adjusted EPS comes in at Singapore 2.24 cents, the company is listing at a forward PER of 15.6x. The market cap at IPO price is $315.1m. Investors should also note that the NTA per share post IPO is 11.33c versus the 35c paid.

The Company is heavily dependent on SBM and Modec for its business and this risk was once again highlighted on the front cover of the prospectus. It is interesting to note that post listing, Lim Tze Jong and Keppel Shipyard will control 79.4% of the company. In addition, Keppel Shipyard will have the first right of refusal should Mr Lim decide to sell out. It is a good sign that Keppel Shipyard would like to acquire the company strategically as long as the 2 major customers have no issue with Keppel becoming a substantial shareholder. 

While i like the sector and the company, for the purpose of this listing, i believe it is already fairly priced. Keppel Shipyard coming in as a cornerstone investor will no doubt help to support its share price but the company is listing in a challenging environment where there are political unrest in the middle east. There isn't much public float to talk about and the share price is likely to be supported if the over-allotment option is activated.  My personal view is that there is not much 'meat' to stag but long term investors may want to consider buying this company should share price drop post its listing. 

Chew's Group Limited

Chew's Group Limited ("Company") is offering 12.79m Placement Shares at $0.25 each for a Catalist listing. The offer will close on 24 Feb at 12pm but there will not be any public tranche. The Company is one of the leading producers of fresh eggs in Singapore and specialize in the production and sale of designer eggs.

Sales grew from $14.5m to $19.2m over the last 3 years and net profit swing from $1.5m to $3.05m during the same period. The post IPO EPS for FY2010 will be 3.61 cents and that translate into a listing PER of 6.9x. The PE will be higher if you consider the service agreements that will likely be put in place. 

The market cap based on the listing price is $21.12m. This is a ultra small cap SME but the business is stable and eggs are always in demand here barring any bird or "chicken" flu breakout.  The company intends to distribute at least 20% of its net profit for the next 3 years as dividends. It is interesting to note that Prime always receive 'shares' as part of its fees for managing IPO, perhaps Prime should receive 'payment-in-kind'?

Since this is a 'placement' only IPO and has small float, it will likely be 'well supported' as majority of the shares are still with the Chew Family (68% post IPO). It is likely to be range bound post listing and the company would do well to expand outside Singapore as the market here is limited. The company is also exposed to a 'single product' risk and a bird flu breakout in Singapore will likely affect the company badly. I would give it a miss.

Wednesday, 16 February 2011

UE E&C Ltd

UE E&C Ltd ("Company") is offering 70m shares (subject to over-allotment) where 60m will be via placement and 10m via public at $0.48 each. The Company is an established mechanical and electrical engineering and construction company, capable of providing integrated solutions and in recent years, have participated in the HDB design, build and sell scheme and Executive Condo through minority JV stakes. According to the prospectus, it has order books worth $631.8m and the orders will be fulfilled over the next 12-36 months. The offer will close on 22 Feb at 12pm but it has been a long while since we last saw OCBC doing an IPO. I don't think the 'track record' for a stag is there even though OCBC has tried to structure an 'over-allotment' option of 10.5m shares to help stabilize the post IPO share price. The market cap based on post IPO shares of 270m stands at S$129.6m

Audited revenue from FY2007-FY2009 rose from $249.6m to $398.4 and the net profit attributable also rose from $7.4m to $29m. First half 2010 revenue showed a slight increase to $184.4m and net profit is 11.4% marginally higher than the previous 1H2009.  Assuming the company is able to achieve its 2010 results in the same proportion as 2009 where 2nd half turns in a better results than the first half, the EPS adjusted for the dilution will be 12.25 cents and that will translate into a listing PER of 3.91x. 

It is interesting to note that companies continue to be priced at such a low PE for an IPO, no wonder not many companies keen to be listed here, especially the cashflow rich companies. This is a critical issue that SGX should seek to address if it wants to attract better companies.

Personally while the IPO is cheaply priced, it is quite "garang" to go out into the market under such poor market sentiments. Perhaps it wants to rush its IPO before the Hutchinson business trust sucks up all the liquidity in our small market.  I would give it a miss based purely from the fact that i dont like the industry/sector which it is in. Perhaps a low PE is warranted.

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