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Tuesday, 28 May 2013

Asian Pay Television Trust - Balloting Results

Asian Pay Television Trust ("APTT") announced the following:

  • Its public tranche of 70m shares was 5.8x subscribed.
  • Its placement tranche of 530.5m shares was 5.2x subscribed.
In addition, approximately 63.8% MIIF shareholders "elected" to receive APTT units instead of cash. That is quite a high acceptance ratio but i understand the "default option" is to receive units. One of my concern is that these MIIF shareholders may create an overhang by trying to sell their APTT units.

The over-allotment of 71.84m units were triggered and these will be used to stabilize the share price if it falls below 97c.

Balloting Results

You will notice a few phenomenon. 

(1) It is very difficult to get the units. The probability of getting the shares are are very poor.
(2) You will get a meaningful allocation if you manage to get some (for those who applied for 10 lots and above). 

In other words, they didn't try to 'spread out' the shareholders base, which in my view, is good for the counter. 

A few asset management firms also appeared in the announcement for being allocated shares.
The shares will start trading tomorrow 29 May 2013 at 2pm.

Did Mr IPO manage to get any shares from the ATM? Stay tuned. The results will only be out after 7pm. DBS computer works slower than others.

Subsequent update: Mr IPO's result

Two accounts, one successful one not. Both applied for 50 lots each. Let's see if it is make a killing or get killed tomorrow. ^_^  I think it will be a hit and run for me, my investment thesis still remain.

Monday, 27 May 2013

Singapore IPOs can finally go "IPO"

From its launch on 14 July 12 till my 2nd Sep target setting of 1,000 friends, i am pleased to inform you that Singapore IPOs finally crossed the 1,000 friends milestone (6 months later than planned)!

It has been a long wait, especially the one from 999 to 1,000. It is like waiting for durian to drop. Or maybe this is like making the first million, which is the most difficult part.  hahaha. Anyway thanks for your support! 

Truly appreciate your help in this mini milestone by "liking" the articles to share with your friends. Your little actions helped contribute in one way or another and i can now go for a public listing if i distribute one share each. ^_^

Actually what pleases me more is not the 1,000 milestone. I am actually happier to see more participation from readers and the "rising quality" of comments that have been appearing on my blog or facebook page. Some of those among us are "sleeping dragons and hiding tigers" and you know that they have done their homework when you read their comments. I won't mention names in case they get carried off to the sky but you know who you are, so keep posting to help others and myself but please do it humbly. ^_^ 

So if you are a passive reader, do check back now and again on the comments from readers on IPO counters that interest you.  You may be able to see some quality comments and it actually helped me make sure i "improve" on my standard as well. haha Some kind readers also link back to the blog when they make their postings on forums, again, i find it humbling that you cared enough to share the posting. My sincere thanks.

Anyway, we are stuck together for the long term, after all, Singaporeans are now ranked no.4 in life expectancy globally. You are stuck with me until you reach at least 80 years old! :)  

Happy IPOing

Asian Pay Television Trust Update

This is one of the stocks which makes me very undecided.

From a fundamental perspective, i don't really like buying it based on my analysis but i am not sure if it due to my biased views on the industry and still am wary of the huge float.

DMG has a research report with a subscribe recommendation. The link is here.

Currently the market is yield starved and when many hungry investors see a headline figure floating in front of you between 7.5% - 8.5%, they just don't care anymore. 

In any case, i think my IPO ratings maybe too "extreme", perhaps i should have given it a 1 chilli rating as it should appeal to those who like the yield and the sector.

My latest update from DBS was that they were cut back severely on their placement tranche as many MIIF investors opted for shares and i was only allocated ONE miserable lot.

Assuming a yield compression to 6.5%-7% for FY13, there is still some "meat" left and the fair value range is between 104 to 118.

I have thus decided to try my luck at the ATM as i only know my allocation today. Hopefully, it will pay off. It will probably be a hit and run for me.

Friday, 24 May 2013

Soilbuild Construction - Balloting Results

Soilbuild announced that its IPO was 7.5x subscribed.

The balloting results as follows:

As you can see, it is quite difficult to get a meaningful allocation unless you apply 500 lots (outlay of $125k) of which you then receive 5 lots. Anything less than 500 lots, you get only 1 or 2 lots and the chance of getting it is quite low anyway and can't possibly cover the brokerage unless the IPO opens strongly.

I didn't apply so no "IPO results" to show you.

Sunday, 19 May 2013

Asian Pay Television Trust

Asian Pay Television Trust ("APTT" or the "Company") finally launched its IPO at a price slightly higher than the mid-point range of $0.97. (The offering range was between $0.92 to $1.00). My preview post is here and the link to prospectus is here. The IPO will end on 27 May 12pm and will start trading on 29 May at 2pm.

The share offering is as follows:
-  Up to 866m units will be via placement 
-  70m units for a public offering. The market cap based on the IPO price is approximately $1.4 billion.

According to news report, the book was about 3x subscribed and given that this is a large float, you can say that it is pretty "impressive".  APTT is offering up to 936,164,086 units at $0.97 each and up to 1,008,004,086 units if over-allotment option is exercised. It is the first listed business trust in Asia focused on pay TV business. Frankly, you have to "credit" Singapore for coming up with the Business Trust regime or else this company won't be able to list here as most regulations require distributions to be made out of profits rather than cash flows. As such, asset heavy companies will find it attractive to monetize their assets via the business trust way (remember Hutchinson Port Holdings?)

APTT intends to distribute 100% of is Distributable Cash Flows and its mandate is to own, operate and maintain mature, cash generative Pay TV and Broadband Business in Taiwan, Hong Kong, Japan and Singapore. As such it is technically possible for APTT  to acquire Starhub Pay TV and Broadband services in Singapore (i am not saying it is going to happen).

Taiwan Broadband Communications Group ("TBC Group")

TBC is the seed asset which is going to be acquired by APTT. TBC group is the no.3 cable TV player in Taiwan with 15% of the market share as of Dec 2012. TBC offers 3 different types of services.

Franchise Area and Subscribers

As of 31 Dec 12, TBC has 751k basic cable TV users, 110,324 premium user and 175k broadband users. What is missing here is "triple play" where mobile, broadband and cable tv are bundled as a packaging (such as our Starhub "hubbing"). It is more of a "double play" of broadband and cable TV. As the infrastructure are "sunk costs", the company will make increasing marginal revenue as the subscriber base grow bigger. The good news is that the company has shown its ability to grow the base, but the not so good news is that the Average Revenue Per User ("ARPU") has been falling. Please refer to table below.


This is how the structure looks like. It is not quite simple structure and personally, i have a natural dislike for complex structure but it is probably for some taxation reasons.

Balance Sheet

You can see that the price which IPO investors are paying is for the "intangible asset" of $2.2b. According to the prospectus, the intangible asset is the Cable TV license to operate which is renewable every 9 years at "no significant cost" and if there is "no breach" of conditions under the license. There is no amortisation charge against this asset as it has "indefinite" useful life. IPO investors do take note of this intangible asset which you are buying into, which is the "promise" to pay you a stream of cash flows. 

Financial Performance

Not exactly a pretty sight. The Company has been making losses each year but somehow the Company has been able to pay out the dividends annually to the tune of $89m in 2012. It is probably a cashflow generating company if we strip out the depreciation and the interest expenses. Let's look at the pro-forma Profit and Loss statement below.

The pro-forma EPS is 1.86c and that translate into a whopping 50x PER if you want to use that metrics. The Company also made forecasts for FY2013 and FY2014, which is to show investors the "money".   

The forecast for FY2014 is higher because there will be no extraordinary costs to the tune of $72m (see the cash flow projection below).

The table below reconciled what is available for distributions to unit holders.

Not sure if i have computed wrongly, i still cannot understand why i need to pay a mulitple of 13x to acquire this company using the pro-forma 2012 balance sheet and income statement. This is very expensive and considering that it is made up of intangible assets with a lot of bank debt. In the event that interest rate rises in future, the distributions will be adversely affected.

Cornerstone investors

Cornerstone investors are taking in about 32% of the company. They are a mixture of traditional (Prudential and Lion Global) and Hedge Funds (Neuberger Berman, OZ Master Fund (same as the one in STX OSV or Vard) and Quantum (Soros Family). I am not sure what they see in this company that i am "missing". Perhaps they see something that i don't. 

Distribution Yield

APTT has a forecast distribution yield of 7.5% for FY2013 and 8.5% for FY2014. Distributions will be made twice a year and the first distribution will be for the period from Listing Date to 30 June 2013. Distributions will be made within 100 days post the end of each period.

My thoughts about this transaction

This is a case whereby new IPO investors are buying off the stake of an older block of investors (shareholders of MIIF). MIIF is currently a listed entity on SGX and is winding down its operations after its board decide to divest all remaining assets and return the money to shareholders.

I have not been following MIIF so I am not so sure what is so "proud" to be associated with the sponsor, Macquarie, since it is because of them that shareholders of MIIF was in this situation. The stock has under-performed since its listing and i am not a fan of MIIF. Shareholders of MIIF are asking if they should request for cash or units in APPT and my question back is would you still want to continue investing with the sponsor or take this opportunity to get out? Probably i will elect cash if i am a shareholder of MIIF.

MIIF still have a large exposure to APTT post IPO and this transaction is to allow them to trigger out of the market post listing.

Large float

The list above is the recent IPO listing sorted by the public tranche available from shareinvestor (i think the data for Perennial is wrong). 

APTT is issuing such a large float (public and placement) that all investors who wants an exposure will probably get it. The large public share offering of 70m is also one of the highest in recent times. If you apply for the public tranche, there is a high chance of you getting it and in a "meaningful" way. I think it will probably be the IPO that ends the Singapore IPO window by sucking up all the liquidity.

What I like about the Company
  • Recurring business of cable TV and Broadband is pretty stable and everyone needs a connection to TV and Internet nowadays.
  • Increasing distribution yield projected from 7.5% in FY2013 to 8.5% in FY2014
My Concerns
  • This is a competitive industry in Taiwan and price competition can get messy and this will affect the distributions. I am not sure of the legal dynamics governing this industry in Taiwan either.
  • Highly leveraged company (67%) and an increase in interest rate will affect this company in future. Don't assume this low interest rate environment is going to last forever. 
  • IPO investors are buying in a intangible asset (Cable TV license) and paying a high EBITDA multiple for this.
  • The Sponsors only own 3% of APTT after the IPO and yet continue to receive management fees and performance fees. I am not sure if the interest is truly aligned.
  • The float is way too big and there is enough demand to make everyone happy, which means upside potential is probably limited. 
  • I think 7.5% in FY2013 is too low for an infrastructure asset. Private equity investors into infrastructure funds will demand a higher return than this.
  • Post IPO, MIIF will continue to hold a significant chunk (to the tune of 525,866,849 units if all MIIF shareholders elect to receive cash) and this will cause a huge overhang on the share price as they need to divest those shares in order to be delisted from SGX (and i don't think they are subject to any lock up since investors who elect to receive units will not be subject to lock up).

I don't know how to appreciate this company and will leave it to investors (such as the cornerstone) who knows how to better appreciate it. I will give it a "chopped chilli rating" but unfortunately, i will probably be vested with some shares from my broker. ^_^

Saturday, 18 May 2013

Soilbuild Construction Group Ltd

Soilbuild Construction Group Ltd ("Soilbuild" or the "Company") is offering 168m new shares for its initial public offering at $0.25 each. The prospectus is here.
  • 2m shares will be for the public 
  • 166m share via placement.
The IPO will close on 22 May 2013 at 12pm and starts trading on 27 May.

Soilbuild is a A1-graded construction group with design and build, turnkey and project management services. It has a 36 year old track record in consulting business spaces, HDB and condominiums. By definition, A1-graded means that it can tender for public sector projects in Singapore with unlimited contract value. The areas of focus for Soilbuild is residential and business spaces As of the date of the prospectus, the order book stands at over $500m.

Financial Highlights

I never like the construction sector because the revenue and profitability is rather lumpy even though this Company has been able to show increasing revenue and profitability. As of FY 2012, the revenue was $213m and the net profit was $22m. To be honest, i have no idea if this profit level is able to be sustained for FY2013 and FY2014. Perhaps more enlightened readers can shed some light.

Business projects are the "significant contributor" to the revenue line but the gross margins are in my views, too low and there is no room for errors.

The EPS for FY2012 adjusting for new shares is around Singapore 3.3 cents and that translate into a listing PER of around 7.6x.  The NAV post IPO is around 8.6 cents, hence investors who are coming in at IPO price, please be aware as the price to book is around 2.9x. I am not sure why the Company couldn't include the pro-forma bonus under the service agreement in the FY2012 results.

The market cap of the Company is $166m based on the IPO price and public shareholders will hold 25% post IPO and the Company intends to pay out at least 25% of it net profit from Listing Date till 31 Dec 2013 and at least 25% of its net profit after tax for FY2014. Assuming the EPS is maintained, it will imply a yield of approximately 3.3% based on the IPO price (3.3c x 25% divide by 25c).

What i like about the Company
  • A1 graded company and the ability to provide comprehensive suite of construction services with proven track record
  • Playing up IPO story with a "Myanmar angle" with 2 contracts there. Yoma was "chased up" recently due to its Myanmar connection.
  • The promise to pay out 25% of its net profits as dividends for FY2013 and FY2014 but what i don't understand is why limited to only from listing date to 31 Dec 2013 for FY2013? Can't they just pay out based on the full year profits?
  • Founder who contributes back to society. He was recently featured in the Sunday Times. You can read the article here.

My concerns
  • I never like the construction sector. A lot of opportunities for dubious practices. Poh Lian construction, a wholly-owned subsidiary of United Fiber System Limited, was recently placed under judicial management due to mis-management of funds and poor contractual deals. The news is here. Considering that Singapore is having a construction boom for the last few years, this is quite sobering.
  • The revenue and profits are always lumpy and difficult to predict and suffers from low margins.
  • Myanmar is probably the "last frontier" but the concern is that this is a un-chartered territory and the company may not be able to do well there and this strategy may back-fire.
  • The owners have already made one round of money 'delisting' the company a few years back. Now they are back with a revised structure but do investors know how to appreciate Soilbuild better now? There have been a list of companies doing a relisting here, Amtek, Courts, etc. The performance post IPO has been mixed.
  • Arms length transactions between the parent company and Soildbuild.
  • Tight labor market and increasing material costs will eat into the margins if the Company is unable to project its costs properly.
Valuation and fair value

As mentioned above, i have no idea if the profit level for FY2012 will be maintained. In this regard, i will just use the audited FY2012 profit level as a "gauge". The peers should include the likes of Chip Eng Seng, Koh Bros and Lian Beng.

According to shareinvestor, as of 18 May 2013,
- Chip Eng Seng is trading at a PER of 6.1x, dividend yield of 5.2%, Price to Book of 1.02x and has a market cap of $499m.
- Koh Bros is trading at a PER of 7.3x, no dividend and a price to book of 0.7x and has a market cap of $143m
- Lian Beng is trading at a PER of 5.3x, dividend yield of 1.9%, price to book of 1.1x and has a market cap of $278m.

As such, i see no compelling reasons to buy into Soilbuild. It is actually quite expensive if i use a Price to Book ratio. Investors might as well put their money into Chip Eng Seng which offers a better value proposition if they want such an industry exposure. However, having said that, the current IPO market and the sentiment is "hot" and the low price of $0.25 will probably mean that investors can "hit and run" but the low public float probably means it is very difficult to get meaningful shares anyway so i will probably give it a miss.

I will give it a 1.5 chillis for IPO punt and a 1 chilli for the longer term. 

Sunday, 12 May 2013

Asian Pay Television Trust Preview ("APTT")

APTT lodged its preliminary prospectus and is currently doing book building for its IPO. 

My broker from DBS sent me the book building term sheet and here are the key terms.

Offering size - 1,393,696,000 units.
Cornerstone -    451,068,000 units. (about 31.4% of offering size)
Placement tranche - 917,628,000 units
Public offering - not less than 25m units.

Book building price range - $0.92 to $1.00 per unit
Distribution yield - FY2013 8.93% to 9.71%
                         - FY2014 8.25% to 8.97%

Cornerstone investors:
  1. Asian Century Quest
  2. Capital Research and Management
  3. Eastspring Investments (part of Prudential)
  4. Indus Capital
  5. Lion Global Investors
  6. Neuberger Berman
  7. Och Ziff
  8. Signature Global Advisors
  9. Quantum Partners (Soros)
The book building will close on May 15 and after the price is set, the public offer will start on 17 May and ends on 27 May. The pricing will give you a hint as to whether the demand for the stock is "strong". I am not sure if there are other special incentives given to the cornerstone investors but we shall see. In any case, i am not 'impressed' with this list of cornerstone. It has the smell of too many "hedge funds" and they are certainly not value investors.

Mr IPO's biased view

I have to tell you upfront that i am biased against the pay TV business in Taiwan. There is only one word to describe it - messy and cut throat. There are many players who want to get in the market only to realize how competitive and cut throat the business is and by being the No.3 player in Taiwan, i frankly don't see what so great about this business. If MIIF has been able to sell it, they would have sold it long time ago rather than "repackaging it" and selling to yield hungry investors now.


Let's look at the financials. Without reading the prospectus in detail, I am not sure how much the IPO proceeds will be used to "wipe out" the long term debt of the company which will then lower the interest and finance costs. I also don't understand why in taiwan, they have to pay such huge tax expenses which is even higher than the profit before tax. Again, i have not read the prospectus in details so i am just shooting off my cuff.

Proforma Statements

The pro-forma statements "looked somewhat different" as it has assumed the issuance of units to have taken place and in using the latest "In-thing" Chinese phrase “停电魔术” the financials suddenly looked profitable and attractive.

Whatever it is, the majority of the proceeds will be used to pay off the original shareholder and not much will be used to pay down the debt. In the addition, i think the large number of units in issue will probably "cap" the upside. 

Let's see if my biased views will change in the coming weeks. I will not give you my ratings and fair value for now. Please check back this blog again when the IPO is officially launched. ^_^  

Thursday, 9 May 2013

Croesus Retail Trust - Balloting results

The balloting results is out and the results announcement is here.

This issue is very hot whereby the placement tranche of 207.6m units is 19.7x subscribed and the public tranche of 21.5m units is 48.8x subscribed. 

The balloting results as follows:

There is only one word to describe. The less you apply, the better the chance of getting some shares. hahaha. 

Mr IPO's balloting results.

I receive 4 lots from the placement tranche and zero shares from my public application!! :(

Congrats to those who managed to get it.

Saturday, 4 May 2013

Croesus Retail Trust ("CRT")

CRT is offering 229.118m Units at $0.93 per unit for an IPO on the Singapore Exchange. The prospectus is here

It is the first retail business trust with properties in Japan to be listed in Singapore. The IPO will close on 8 May 2013 12pm and be listed on 10 May 2013 at 2pm. 207.613m will be for placement and 21.505m for the public.

Business Trusts Versus REITs

CRT is offered under the business trust structure. While previously i have been cautious on business trust structures, i think my perception has since "improve slightly" as there is no reason for Sponsors not to stick to what they have "promised" unless something detrimental happens. In other words, the Sponsors should continue to pay 90% or 100% of the cashflows back to unit holders even though it is not mandated by laws here. 

However, having said that, the underlying business is important and retail income is definitely one of the more stable business vis-a-vis, say a shipping or hospitality trust. Retailers don't move their shops every other month and are typically locked in for years.


CRT intends to distribute 100% of its distributable income from Listing Date till 30 Jun 2015 and thereafter at least 90%. As discussed, the actual level of distribution is still determined by the Trustee-Manager and not mandated by law and we have to trust the Manager to "stick to their promises".

The projected yield is pretty attractive at 8% given that a lot of yield compression have already taken place on SGX. Most of the retail REITs  such as CapitaRetail China or Capitamall or even Mapletree Greater China Trust are now trading at between yields of 4-5%.

Initial Properties

The pictures are below. Frankly i haven't been to these malls but in my view, that is secondary if we are comfortable that the sponsors are reputable ones and i have seen many "Aeon" malls in Japan while on my trips there.

The biggest contributor to the income is no.4 above. Mallage Shobu but you can see that the rental income are evenly distributed among the 4 properties. No key concentration risk.

The properties are freehold properties, currently 100% rented out and has a weighted lease expiry of 11.3 years. You can see that the tenants are locked in for the long term!

According to reports, the demand for the placement tranche was overwhelming and many were cut back. The usual cornerstone investors are mostly reputable "long term" holders. You can find their profiles in the prospectus.

What I like about CRT

- Properties are focused on the retail sector and income will be stable.
- Japan is currently the "in place" to invest (surprisingly) under the new PM Abe.
- Strong sponsors in Daiwa and Marubeni and they have given voluntary ROFRs for sale of future real estate in Asia ex Japan. Both the sponsors are listed on the Tokyo Stock Exchange and have significant combined market caps of more than S$28b,
- Good pipeline of assets in Shenyang and Shanghai without the developmental risks and an additional 4 Japanese properties.
- Investing in JPY/SGD at a 10 year low as mentioned in my earlier preview post.
- Strong institutional demand for the units.

My Concerns
- Economic prospects have not been good in Japan for the last 10 years but that might be improving and the retail sector is still more resilient than the rest.
- High leverage of around 44%, which will affect the company's cashflows if interest rates goes up.
- Earthquakes or natural disasters but this should be covered by insurance.

Fair Value

Assuming a fair value yield of 6-7%, the price should have a fair value range of between $1.06 to $1.24. It is a 3 chillis for me and Hoot ah. :)

ps - sorry i did this in a hurry knowing many "fans" are asking for the report. Have to go now and i didnt have time to find out about the NAV which should be around par,

Happy IPOing

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