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Saturday, 18 January 2014

Kim Heng Offshore & Marine Holdings Limited

Kim Heng Offshore & Marine Holdings Limited ("Kim Heng" or the "Company") is offering 174m shares for the IPO at $0.25 each of which 160m are new shares and 14m are vendor shares. There will only be 3m shares for the public with the balance via placement.

The prospectus is here. The IPO will end on 20 Jan 2014 at 12pm and begin trading on 22 Jan 2014. The market cap post IPO will be around $177.5m. I have two "fact sheets" about the IPO, one from DBSV and one from Lim & Tan for your reference. 

Principal Business

Kim Heng has a long history and is an established integrated offshore and marine value chain services provider. The Company offers a one-stop solution for oil & gas projects with customers in more than 25 countries globally.

The Company specializes in offshore rig services and supply chain management as well as vessels sales.(See picture below if you need the details on the business the Company is engaged in).

Financial Highlights

The last 3 years figures have been fairly inconsistently with revenue fluctuating and net profit hovering around the 17-18m in the last 2 years. The first half performance also showed a slower pace versus the same period last year. The net profit declined by 24% from the same period last year. As i am not privy to the forward looking results, i can only make a guess.

According to the prospectus, the post invitation share cap is 710m shares and the adjusted EPS for 1H2013 is 1.1 cents. I will assume the full year EPS to be = 1.1 divide by 0.6 (since 1H seemed to be stronger than 2H for FY2012) = 1.8 Singapore cents. Based on the IPO price of 25 cents, the forward PE is around 13.8x.

However according to the fact sheet from Lim & Tan, the Company expects a more robust second half and recommend investors to 'subscribe' for the IPO. Assume a more robust second half, my EPS will be approximately = 1.1/0.4 = Singapore 2.75c and that translate into a forward PE of around 9x (which is reasonable).


Looking at the list of shareholders, Credence Capital Fund II is run by Tan Chow Boon, Koh Boon Hwee and Seow Kiat Wang and one of the investors of Credence Capital Fund II is Mr. T

Credence bought into the Company at an average price of 20c. As they invested only in 15 May 2013 and holds a 17.6% stake post IPO, they are still in the value creation mode.Given that it is supposed to generate private equity like returns, Credence's target price to exit will probably be above 40c with a 2-3 years time frame. 

What I like about the Company
  • Established brand name with more than 40 years track record
  • Oil & Gas sector exposure
  • Blue chip customers
  • Experienced management
  • Reputable institutional investors
My Fair Value

Assuming my more "robust" EPS of 2.75c is correct, i will give the IPO a fair value PE range of between 10-12x forward PE and that translate into a price of between 28c to 33c.

My Ratings

I am not privy to any 3 year plan of the Company but i believe Credence will not be there for the short term. As such, i will not give the 1H 2013 results too much weightage. Ms. Syndicate told me that this IPO is very hot and will have a +10c debut. I will tamper that expectation down a bit and say that i believe an opening above 30c is very likely even though the huge placement float of 174m can be a turn off unless they place the shares to institutions and strong hands. If you want to give this a punt, i will say just do it but make sure you apply at least 50-100 lots so that you will get around 3 to 5 lots. 

3 Chills for me this time and Happy IPOing 

1 comment:

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