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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. :-(

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