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Monday, 23 December 2013

Merry Xmas and a Happy New Year

Received a little surprise from Shares Investment for my small contribution of IPO articles. 


I take this opportunity to wish all readers a blessed festive season and a wonderful year ahead. Hope next year will be even better than this year for you and your loved ones. :)

Thanks for the support to Mr. IPO.

Thursday, 12 December 2013

Linc Energy

Please note that Mr. IPO is vested

Linc Energy launched its IPO today with a very thick prospectus. It is offering 47,850,000 shares at $1.20 each of which only 500,000 is reserved for the public. The IPO will close on 16 Dec 2013 at 12pm.

Linc Energy was delisted from the ASX to float on SGX to "improve access to capital markets" and reposition the business to deliver its "long-term growth strategy." You can read an article from Bloomberg here. From the look of it, the amount raised of S$47.9m is frankly insignificant. As such, i would not deem this as a real "IPO" but more of a relisting exercise. There will be an over-allotment issue of 4m shares.

Linc Energy is a diversified energy company with a portfolio of different assets.

Linc Energy believes it is the only company in the world to have produced diesel and jet fuel using its proprietary UCG technology (whatever that is...). It has three business divisions

Conventional Oil and Gas

Unconventional Oil and Gas


Future Plans

The Company has well laid out strategies for the near term but it will probably cost money as it accelerates its exploration program.

UCG Technology

I am a layman in this but this technology seemed interesting where it produced diesel and jet fuel from this technology.

Financial Highlights

The Company has been making losses for the last 3 years but this is not surprising, considering the 2 last E&P companies, KrisEnergy and Rex International

Looking at the cashflow statements, the Company is raising debt from notes issuance to pay for its oil and gas exploration program. It is interesting to note that the EBITDAX for its Oil and Gas assets for FY2013 is around US$78m. (The EBITAX for KrisEnergy based on its prospectus was US$60m).


It is interested to note that investors are paying par to get into this company. As mentioned above, this is not a fund raising exercise.

What I like about the Company
  • Largest independent upstream oil & gas exploration and production company.
  • Largest Singapore-listed coal company
  • Strategically located assets globally, especially in Gulf Coast, US and Australia.
  • Interesting proprietary UCG technology
  • Investors are buying in at close to par value (see Dilution section above) with increasing revenues prospects (see Future Plans)
My Concerns
  • I don't really know how to value this company
  • The oil exploration may not yield the intended returns
My Chilli Ratings

Despite the down-trending market, KrisEnergy and Rex International are still 13% and 22% above its IPO price respectively. In this regard, given that investors to Linc Energy are buying in at par value with clearly outlined future plans, i will give it a 2 Chilli ratings. I also like that fact that it is the largest coal company listed here (if you still remember the de-listing of Straits Asia Resources). From the grapevine, I heard that the demand for the shares are pretty hot. My personal view is that you will be able to hit and run but I would have been more convinced if the market sentiments is better that what it is right now. With only 500,000 shares available, it will not be easy to get for the retail investors, so good luck if you are trying.

Happy IPOing

Tuesday, 12 November 2013

Pacific Radiance - Balloting Results

Pacific Radiance announced that its books was 2.2x covered.

The balloting results for the public tranche is as follows:

You can see from the table above that it is truly difficult to get the shares via the public market as there were only 5m shares available.

Those who applied for 100 lots only have a 33% chance of getting 6 lots each.

With regards to the placement tranche, there is some support as well. The directors supported as well as some interesting institutional investors.

I will not elaborate further, good luck to those who managed to get. I am not sure if it will open with a bang but will be happy if it is trading above $1.

Saturday, 9 November 2013

Pacific Radiance Ltd

Before you read further, please note that Mr. IPO is vested in this company from the placement tranche. Do not continue unless you are perfectly happy to have a biased view.

Pacific Radiance Ltd ("Pacific Radiance" or the "Company") is offering 171.875m new shares at $0.90 each, of which only 5m shares are for the Public and the rest is via placement. The IPO will end on 11 Nov 2013 at 12pm and list on 13 Nov 2013 at 9am. The market cap will be S$653.2 million. The link to prospectus is here.

Principal Business

The Company is a young offshore service support provider and owns and operate a diverse fleet of offshore vessels that support oil and gas projects.

The Company operates on the principal of 3Rs. Relevant, Reliable and Responsive. Hope the 3R can also mean Right Management, Right Business and Right Valuation? 

There are 3 business segments:
  • Offshore Support Services Business
  • Subsea Business
  • Complementary business such as marine equipment and project logistics
Industry Outlook

Personally, I do like the oil and gas sector. The key points will be:
  • Oil will always be in demand and oil reserves are always viewed very strategically 
  • There are many untapped reserves in the region and you can see KrisEnergy and Rex International busy looking for oil reserves in this region. The increased activities bode well for companies such as Pacific Radiance 
  • Oil and gas projects are usually very long term in nature and that means that in order to lock in vessels, Pacific Radiance will enjoy long term chartering contracts. This translate into a steady stream of cash flows for the assets.
Financial Performance

The financial results have been very impressive and the revenue grew by a CAGR of 48% (in case you don't know, CAGR is pronounced as "K-Girl" or known as Cumulative Annual Growth Rate) from US$59.8m in FY2010 to US$130.8m in FY2012. The first half of 2013 continue to show a 23% growth to US$77.6m. 

The net profit after tax was even more impressive once the Company reaches a certain scale. It grew from US$14.8m in FY2010 to US$32.2m in FY2012. The first half of this year was even more impressive, growing 178% from US$10.7m to US$29.8m for the 1H 2013. In fact, the first half profit is almost equal to prior year's profit. 

Use of Proceeds

The bulk of the proceeds will be used to acquire new vessels and to pay off existing financing and UOB probably got the mandate to manage this IPO because of its close business relationships with the Company.

Valuation Metrics

Book building
The book building range was from 81 cents to 93 cents and the final strike price was 90 cents. According to my sources, the book was very well covered and they decide to give more shares to "Tier one" institutional investors and cut back the allocation to the rest. In this regard, many retail investors who put in orders via their brokers or remisiers were cut and these retail investors will have to prove that they are accredited investors before they are being allocated any shares. One of my brokers in UOBKH was allocated only 2 lots and asked me if i want to subscribe.

Price to Book
According to the prospectus, the NAV per share post IPO will be around 61.9 cents. Based on the IPO price of 90c, the price to book is around 1.45x. Not exactly "good value" but you are not expecting the cash rich owners to sell you at book value, do you? 

Price Earning

The earnings per share based on the enlarged share capital and service agreement, will be around Singapore 5.4 cents. That translates into a historical PER of 16.6x. It is not cheap but not applicable given that the first half earnings is around 92% of last year's earnings. 

Given that the first half of 2013 has shown such strong traction with profit growing by more than 100% and that 2H of the year is typically "stronger", i will be more conservative and assume a doubling of EPS to Singapore 10.8 cents for the entire year. That translate into a forward PE of around 8.3x, which in my view, is reasonable for a company showing such good "K-Girl". 

Well diversified revenue base

You can see that the revenue is derived from Asia (58%), Africa (18%) and Australia (15%) but a closer look shows that it is truly well diversified and not over-reliant on any country.

Management Team

Some questions have been asked about the management team and whether they have caused Jaya's troubles in 2008. The answer is no. Jaya Holdings was sold to a private equity fund managed by Affinity in 2006. The news is here. The PE firm probably mis-managed the operations and took on too much leverage which resulted in its financial trouble during the global financial crisis in 2008. Affinity then sold Jaya for a big loss to a consortium led by Deutsche Bank in 2011. The news is here. Jaya Holdings has since emerged from the scheme of arrangement and announced dividends for the first time. The news is here.

As such the founders of Pacific Radiance have nothing to do with the troubles at Jaya. Pang Yoke Min may instead have used the cash he received from the sale of Jaya Holdings to kick start Pacific Radiance by buying over the majority stake from Mr. Mok Weng Vai. Mr. Pang will continue to own 64% of the company post IPO.

It is also interesting to know that the founders are taking a pay-cut post IPO. For a company of this revenue and profitability, i would expect them to get more pay but they have actually took a pay cut in 2013 leading to the IPO. Good corporate governance and in-line with shareholders' interest.


Let's take a quick look at the competitors and what they are trading at. I think the closest competitors should be Jaya, Nam Cheong, Ezion and Swiber.

The table below is generated from Capital IQ.

Pacific Radiance is going to IPO at price to book of 1.45x, that is more expensive than Swiber and Jaya but cheaper than Nam Cheong and Ezion.

Assuming the fair forward PE range for Pacific Radiance should be between 9x to 11x, the fair value range of Pacific Radiance should be between 97 cents and 119 cents. 

What I like about the Company
  • Serving the Oil and Gas sector
  • Proven and competent management
  • Strong revenue growth and profit momentum
  • Well diversified revenue base
  • Fair valuation
My Concerns
  • Competitive landscape
  • How long will the revenue and EPS growth last
My Chilli Ratings

Overall, i like this company and i think there should be some upside from here. I will give it a 2 Chilli rating. Having said that, the float is pretty small at only 5m shares. In this regard, the probability of getting the shares will be limited. Please note that i am vested.

Monday, 4 November 2013

Figtree Holdings Limited

Figtree Holdings Limited ("Figtree" or the "Company") is offering 54.546m placement shares at $0.22 each. This is a pure placement tranche with no public shares and the shares will be listed on Catalist. The IPO will end on Nov 7, 12pm.

Principal Business

The Company is basically a main contractor specializing in the design and building of commercial and industrial facilities. 

Financial Performance

It is interesting to know that this Company basically grew from zero revenue to $60m in 3 short years and the adjusted EPS as of FY2012 is Singapore 1.37 cents. Assuming the profit increased by 50% in FY2013, the adjusted EPS will be Singapore 3.06 cents (I am just guessing).


Do note that Freight Links (a listed company on the mainboard) has a 20% stake in this Company post IPO and it increased its stake by buying an additional 13.1m shares at $0.20 each from Danny Siaw in October 2013, probably in order to maintain its shareholding at 20% to make it an associated company. The 20c will probably served as a "independent valuation" of the firm.


Based on the IPO price of 22 cents, assuming the service agreement is in place and using the enlarged share cap, the historical PE is around 15.2x. Using the adjusted EPS of 3.06, the forward PE is about 7.2x.

Mr IPO's rating

Given that there is no public tranche and i am not privy to its forecasted earnings plus the short operating track record, i will give it a one chilli rating.

My gut feel is that given the small float and low priced IPO, the downside is probably limited for a start but whether the share price will go up post IPO will depend greatly on who they place out the shares to and its subsequent financial results.  

Saturday, 2 November 2013

Viva Industrial Trust - Balloting Results

Viva Industrial Trust ("VIT") finally released its balloting results, slightly later than usual.

The public offer of 21m shares was slightly more than 5x subscribed and the balloting table is below for your reference:

You can see that they have allocated a lot of shares to the "big buyers", i.e. those who applied 50-99 lots will get 40 lots and those who applied for 100-299 lots will get 87 lots. I am not too sure if these bidders will be too happy when the IPO starts on next monday at 2pm. 

Good luck. As mentioned in my earlier post and on facebook page, i have given it a miss.

Wednesday, 30 October 2013

Viva Industrial Trust

Viva Industrial Trust ("VIT") is offering 211,736,000 stapled securities at $0.78 each. The prospectus is here. The IPO will close on 31 Oct 2013 at 12pm. The placement tranche will be for 190.562m shares and the public tranche of 21.174m shares. In addition, a Chinese property tycoon invested S$200m, Ho Lee Group and Kim Seng Holdings take up $75m and United Engineers $23.2m. The Trust will have a market cap of $771.7m post IPO. 


VIT is a Singapore-focused industrial Trust, similar to the SoilBuild Business Space REIT.

Properties (Initial Portfolio)

The majority of the asset type is business park and has a portfolio value of S$743m. The 3 properties are UE BizHub East, Technopark@Chai Chee and Mauser Singapore. Below is the graphical view of the break down by asset type.

Potential Acquisition Pipeline

While the acquisition pipeline looks "interesting", do note that it is only the right of first refusal that was being granted to VIT. In other words, VIT will still have to buy at market value at the point in time.

The listed peers are trading at average of 1.08x book and 7.5% yield. The NAV per share based on the pro-forma balance sheet on page 58 is $0.74 and that translate into a price to book of 1.05x. The Trust is projecting yields of 8.8% for FY2014 and 9.0% for FY2015 which makes it look more attractive relative to its peers.


The first distribution will be for the period from Listing Date to 31 Dec 2013 and will be paid before 31 March 2014.

What I like about VIT
  • Experienced management. Wilson Ang was previously the Managing Director and CEO of Cambridge Industrial Trust from 2005 to 2009
  • Attractive projected yields of 8.8% for FY2014 and 9.0% for FY2015 vis-a-vis its peers
  • Strong acquisition pipeline where it has a right of first refusal
My Concerns
  • Remaining lease of 45 years (which is why Industrial REITs need to provide a higher yield vis-a-vis a retail REIT with longer leasehold)
  • Rental are "artificially" inflated by the rental support from Sponsors
  • Over-saturated Industrial Business trust market. 
  • Selling a "lousy asset" like Technopark@Chai Chee at high valuation even though the lease remaining is only 18 years.
Fair Value

Assuming we take the most conservative view where it will price between 0.94x PB to 1.03x PB, the fair value range will be 70c to 77c. 
If it trade between yields of 7.5% to 8.7%, the trading range will be between 79c to 89c. My gut feel is that it will trade between 75c to 82c on debut.

My Chilli Ratings

Given that the most recent Soilbuild Biz REIT is still below its IPO price and the deluge of industrial trust, it is inevitable that VIT has to price itself on the lower end to provide the yields which cornerstone investors will invest. I also do not like the 'rental support' concept as the sellers are probably conflicted. In other words, they are selling at a higher price and then provide the cashflows back as rental support. 

Don't expect too much fireworks as this is a yield product. I will give it a one chilli rating and probably give it a miss as well.  

Tuesday, 29 October 2013

ValueMax - Balloting Results

The balloting results for ValueMax is out and i need to analyze why my 'red underwear' is no longer effective. Nothing again! :-P

The balloting table is as above. The public tranche of 5m shares were 146x subscribed. Those who applied for 100 lots got the "bulk" of the IPO at 8 shares each. 

It is interesting to know that "Han Seng Juan" is one of the placee and he used to be a "star broker" at UOBKH. We shall see if he has a "positive" impact on the shares tomorrow.

Good luck to those who managed to get it.

Tuesday, 22 October 2013

ValueMax Group Limited

ValueMax Group Limited ("ValueMax" or the "Company") is offering 138m New Shares at $0.51 each whereby 5m shares will be for the Public and the balance via Placement. The prospectus is here. The IPO will close on 28 Oct 12pm.

Principal Business

ValueMax is one of the oldest and most established pawnbroking chains in Singapore and the first to be listed on the Mainboard of Singapore. The other two competitors, Moneymax and Maxi-Cash are listed on Catalist. I guess I didn't notice this "pawn" because there are no glamorous artiste to "brand" the company. The Company currently has 17 outlets in Singapore.

Financial Highlights

As in such businesses, the revenue is impressive but not the net margins. The Company made $14.3m last year. Assuming the profit is maintained for FY2013, the dividend will be 50% x 16.3m (pro-forma) divide by 533.5m shares = Singapore 1.52 cents. That translate into a projected yield of around 3%.

Based on the enlarged share cap, the PE valuation is around 51 divide by 3.04 = 16.7x. Not exactly "value" for money but much better than its peers. The market cap is around $272m at IPO price.

Peer Valuation

Moneymax is currently trading at 27x PE and Maxi-Cash at 48x PE. While valuation by itself is not 'cheap', valuation of its peers is even more crazy. Clearly from the financial results, ValueMax is definitely a leader in pawn broking over MoneyMax and Maxi-Cash. Moneymax is still 23% above its IPO price and Maxi-Cash is 122% over its IPO price.

I will be more "conservative" and assume a fair peer valuation of 20x-23x, that will translate into a fair value range of between 61c to 70c.

What I like about the Company
  • Overseas presence in Malaysia. Compared to its peers, ValueMax has successfully built up a network of 4 pawnshops in Malaysia since 2007 and has intention to expand further.
  • Good succession plan. The Founder has groomed his son and daughter to take over the business and they are both certified gemologist. 
  • Good IT system allows customers to renew their pawn tickets at any of its outlets.
  • An impressive top line of > $450m 
  • Clear direction on its business strategies and future plans such as a dedicated flagship store for HNWs. 
  • Clear intention to pay 50% of its profit after tax as dividends in FY2013, 2014 and 2015.
My concerns
  • Not another pawnbroker. Are we reaching saturation point?
  • Given that this is primarily a cash flow business, are the controls adequate to allow the company to expand successfully into Malaysia and overseas.
My Chilli ratings

Given that this is a well run company and a clear "leader" in this industry that is also listed on the mainboard and paying dividends, it should definitely deserve a valuation premium over its peers. In addition, the tight float and cheaper than peers valuation all point towards an 'explosive' debut for this counter. I will give it a 3 Chilli ratings but the small public tranche may once again prove to be a disappointment for many.

Tuesday, 15 October 2013

Singapore IPO market recap

I wrote this article for the Share Investment Conference prior to the recent small caps "meltdown". Reproduce here for your convenience now that the event is over.

The Singapore IPO market continues to be buoyant in the first eight months where we witnessed an exciting "fight" between SPH REIT and OUE Hospitality Trust. Unfortunately, the Singapore IPO scene has been far dominated by the listings of mainly REITs and Business Trusts. Good companies trying to list here have been few and far in between, with only a handful of oil & gas companies such as KrisEnergy and Rex International, trying their best to light up the local IPO market. With the market currently in doldrums, it will be a challenge to see any strong pipeline of IPOs in the coming few months.

Let's now do a recap on the companies trying to IPO in the Singapore market for the first 8 months of 2013 and dig deeper into the trends to find out whether investors managed to profit from these IPOs.

As of 31 Aug 2013, there had been 19 IPOs in Singapore of which it was almost evenly split between companies listing on the SGX mainboard and those listing on Catalist. Catalist continues to attract smaller companies with short track records but this is also reflected by the small amount of money raised of approximately $190m.


SGX Main Board
Let's take a more in-depth analysis into the companies that was listed on SGX Main Board.

As you can see, SGX continues to be a strong magnet for REITs and Business Trust listings in the region! Asian Pay TV Trust, Croesus Retail Trust and OUE Hospitality Trust raised a total of $1.18b while Mapletree Greater China Commercial Trust, SPH REIT and Soilbuild Business REIT raised a total of $1.4b! In my view, I think investors' fatigue are setting in for such listings and it will be a challenge to see a mega REIT or Business Trust listing in the near term.

Performance of Main Board Companies post- IPO

Let's do a more in-depth analysis on how the main board IPO listings performed and whether investors are better off selling off the stocks on the first week of its listing or holding it till 31 August 2013.

The table above shows the performance of the 10 main board IPO companies listed this year. Green colour indicates that is above IPO price while the orange colour indicates that it is below IPO price.

As you can see from the table above, 7 counters were above water at the end of the first week but that number dropped drastically to 3 if you extend the period till end Aug 2013. It somewhat shows that investors of IPOs this year are better off selling them at the end of first week of listing rather than to hold on to them. The data showed that 7 out of 10 mainboard IPO companies are in the 'red' as of 31 Aug 2013 and only one company, Overseas Education Ltd, managed to see its share price appreciate by more than 50% since listing.

You can find the detailed graphical performance of these 10 main board companies below.


Let's do a similar analysis for companies listing on Catalist. In case you don't know, I do have a natural dislike for small caps listing on Catalist but once again, I have been proven wrong by my own findings by the share price performance of these Catalist listings post IPO.


The table above showed that after one week of listing, 6 out of companies listing on Catalist are in the green and as of 31 Aug 2013, the statistic remained the same. In fact, the table also showed that the share price increase of small caps has outperformed the IPO companies on mainboard. An amazing 4 out of 9 companies have seen their share price increases by more than 50%! Investors who hold on to these Catalist companies post listing are definitely better off than selling them on the first week.

The graphical view on the share price performance of these Catalist companies.


The analysis above proves to be humbling as the Catalist listings have proven to outperform the main board listings.  For me personally, I have to learn to be less discriminating towards Catalist listings and have more confidence in them.

However having said that, under the current market practices, most retail investors like you and I will have little or no chance of getting any shares if the manager opt to have only a placement tranche and no public tranche.  Investors who are keen to invest in small cap Catalist stocks will have to buy from the market post listing and that requires another leap of faith as well.

Are you ready to take the leap and support our Catalist IPO market?

Friday, 4 October 2013

AsiaPhos - Balloting Results

AsiaPhos announced its balloting results. The announcement is here.

The IPO public tranche was more than 172x subscribed but when combined with the placement tranche, it is about 3.8x subscribed.

Placement Tranche

The results of the placement tranche is as follows:


The placement tranche was well supported and interestingly, Jim Rogers is one of the investors who have also recently invested in another commodity company listed here, Geo Energy. We shall see if his endorsement has a positive impact on the stock.

Public Trance

As for the public tranche, it is pretty difficult to get. If you apply for 100 lots, you will have a 18% probability but at least, they give you a more 'decent' 6 lots.

Mr IPO's results

It's a "white wash" and Mr. IPO failed in both ESA. :-(

Thursday, 26 September 2013

AsiaPhos Limited

AsiaPhos Limited ("AsiaPhos" or the "Company") is offering 122m shares at $0.25 each of which 97.6m shares are new shares and 24.4m are vendor shares. 120m shares will be via Placement and 2m shares will be for the public. The link to the prospectus is here. The offer will close on 3 Oct at 12pm and the Company will be listed on Catalist. Based on the listing price of $0.25, the market cap of the Company is S$200m.

AsiaPhos is the first mineral resource company to be listed in SGX focused solely on exploring and mining of phosphate in the PRC with the ability to manufacture and produce phosphate-based chemical products. The Company currently own exploration and mining rights to two mines and a processing plant. Phosphate is a valuable and non-renewable natural resource and the main use of phosphate is to produce fertilizers.

An overview of AsiaPhos integrated strategy.

Financial Highlights

The Company has been profitable in the last two years where revenue increased from $4.5m to $4.9m but net profit fell from $2.9m to $1.2m. While the net margin last year was a decent 24.5%, it is surprising to see the Company turned in a loss for the first 3 months. This is somewhat surprising given the significant increase in mining production. However, the explanation given is that the low quality rocks are sold while the better quality rocks are kept as inventory for subsequent use in P4 processing. The results should improve this year as the plant has started processing.

It is good to see mining output production increasing strongly.

According to the prospectus, the NAV per share based on the enlarged share capital of 800m shares is 6.45 cents (versus the IPO price of 25 cents) and the listing PER is a whopping triple digit of  > 156x. Having said that, given that this is a resource company and its value lies in the reserves which it has, Historical PER is probably not a right metric to value this company.

Independent valuation

It is good to note that they have obtained an independent valuation for the assets at $269.8m, which is trying to give you comfort that the market cap is justified. The valuation methodology used is the Net Present Value of the forecast free cash flow produced by the assets. This is also known as the Discounted Cash Flow method. Please refer to Appendix K for the report but having said that, the assumptions used is critical and i am no expert in this field. The comfort however, is that they have used a very high discount rate of 14% which is probably right given the risk involved in mining and production.

Assuming the valuation range of $207.6m to $269.8m is right and without considering the other assets and liabilities, the NAV per share should be around $0.26 to $0.33, with further upside should market go crazy.

Use of Proceeds

The use of $24.4m proceeds is as stated below.

Shareholdings and Pre-IPO Investors

AsiaPhos will continue to be majority held by the Ong Family post IPO to the tune of 67.3%. Public investors will hold 15.3% of the Company.

There is a long list of pre-ipo investors and they are selling some shares at the IPO. The only 'comfort' if any, was that their entry price of $0.1875 was less than the usual 40%-50% discount to IPO price. They will add to the list of sellers when the moratorium expires.

However, the comfort i have is that the major shareholders are Singaporeans! ^_^ .... without saying too much, that adds a great deal of comfort.

Macro View

It is interesting to note that Morocco is a major supplier of phosphate to satisfy 80%-90% global demand till year 2030 and by 2100, many countries would have run out of reserves. According to the same article, China is becoming a net importer of phosphate and have imposed a 150% export tariffs on exports of phosphate.The article is here for your reference. There is another article on the demand and supply of phosphate in China and the article is here. If there is any one report which you should read from the prospectus, it will be in Appendix L: CRU Industry report. Go read it please.

It is interesting to note that the price of Phosphate has been trending downwards in the near term and was very volatile during 2008-2009 period. It will probably be bad for AsiaPhos should the price of phosphate collapse.

What i like about the company
  • Sichuan is a resources rich region and the quality of the rocks are better (at least that is what the prospectus says)
  • Lower operating costs in Western part of China
  • It is a resource which is in constant demand.
  • A Chinese mine owned by Singaporeans.
My Concerns
  • Mines and plant are situated in Sichuan, which is very prone to major earthquakes in recent years.
  • Unable to export outside of China due to punitive tariffs
  • The quality of the board. I am not sure if there are enough diversity of independent views and experiences? The board of Directors comprises 2 non-executives, one is the daughter of and the other is the nephew of the CEO and the other 2 independent directors currently sit on the board of Sheng Shiong as well.
  • Mining production capacity may not be as robust.
  • Declining Phosphate prices
  • Company has listed at least 5 major producer companies as competitors (Please refer to Chapters 4 and 5 in Appendix L)
My Valuation and Ratings

I have to tell you (once again) that i do not know how to value energy and resources companies. Too complicated for me and too many assumptions in the valuation methodology. However, having said that, my 'grapevine' said that this issue is hot even though i am not particularly impressed with the track record of Asiasons. I have also shared with you my valuation range of $0.26 to $0.33

Given the low price of $0.25, the well-received placement tranche and the fact that it is the first mineral resource company to be listed on SGX, I will  given it a 2 Chilli rating. However, given the small public float and the fact that  it is very difficult to get from the public tranche of 2m shares, it may not make sense for retail investors who apply for few lots.  

Happy IPOing and my intention is to hit and run.

Friday, 13 September 2013

Xyec Holdings Co., Ltd

Xyec Holdings ("Xyec" or the "Company") is offering 25m Placement Shares at $0.26 each for a listing on Catalist. There is no public tranche and frankly, i don't want to spend too much time on this so please don't expect a lengthy write up. 

The IPO will close on 16 Sep and list on 18 Sep and the prospectus is here.

Principal Business

Xyec provides engineering and IT consultancy services for major manufacturing industries in Japan, such as the automobile and aerospace industries.

Financial Performance

Its a small revenue generating company with less than S$100m in FY2013 and a net profit of around $1.2m. 

The listing PER based on enlarged share cap and assuming service agreement is in place is approximately 14.7x. It is not attractive to me and expensive.

Based on the listing price, the market cap is around $28.61m


The Company intends to pay 20% of its net profit after tax as dividends for FY2014, FY2015 and FY2016.


I will give it a 0 Chilli Rating for the following reasons:
  • Expensive listing valuation
  • Small firm located in a competitive sector
  • A small cap Japanese company listing on Catalist. It is a matter of time before investors here forgets about it and do expect poor trading liquidity and lower valuation to follow suit.  
This is not the kind of IPO i am hoping to see. SGX will need to get its act together to attract better companies to list here.

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