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Thursday, 14 August 2014

JAPFA - Balloting Results

JAPFA announced that its public offer of 16.8m shares was 9.7x subscribed. Given the larger float and quantum and the weak IPO sentiments, i have to say that this is a very strong subscription rate. The overall IPO was about 5x subscribed.

Balloting Results

The above table shows the balloting results. Those who applied for less shares will actually have a higher chance than those who applied for more shares... unbelievable.

It is interesting that they did not declare who the substantial placement holders are... from the grapevine, Asdew and Marubeni are substantial placement subscribers but somehow the Company did not reveal those names.

Instead, they chose to announce that Dymon Asia Multi Strategy Master Fund has subscribed for 500,000 shares. Dymon is run by a NTU alumni called Danny Yong and he is one of the global top 40 highest earning hedge fund manager. He definitely helps fly our Singapore flag in the hedge fund world. ^_^

Mr. IPO's result

In case you still don't know,  Mr. IPO is one who puts money where his mouth is and is a pretty straight forward person. Yes or No. Buy or Sell. 

Anyway, i am not successful in my IPO application, perhaps i should have applied for less shares instead.

Happy IPOing.

Tuesday, 12 August 2014

IREIT Global - Balloting Results

IREIT Global's public offering received a strong support and was 7.6x subscribed. It will debut on 13 Aug 2014 at 2pm.

I would say that this is a strong subscription given the weak sentiments. Investors who applied for 50 lots will have a 68% chance and receive 9 lots.

It is interesting to note that Alan Wang from Asdew Acquistions is in this as well. His stocks such as QT Vascular and Starburst have been performing really well. Let's see if we can see some "magic" on IREIT tomorrow.

Happy IREITing

Saturday, 9 August 2014

Happy Birthday Singapore

Singapore turned 49 today. Happy birthday Singapore. 

I will miss the floating deck when the celebration shifts to Padang then back to the National Stadium. It is always so inspiring when you celebrate the nation's birthday against the city backdrop. We have definitely come a long way. 

I make it a point to hang the flag outside my house during August. How else to show my appreciation to our forefathers for making Singapore what it is today. 

Happy birthday Singapore. May you continue to enjoy years of peace and prosperity. 


Majulah Singapore  


JAPFA Ltd (or the "Company") is offering 248m shares at $0.80 each for a listing on the Singapore Exchange. The IPO will close on 13 August 2014 at 12pm and starts trading on 15 August. The international offering will be 231.2m shares with the balance 16.8m shares for the public (at least this is a decent amount). There is an option to over-allot 37.2m shares for stabilization and the placement tranche was 5x covered despite the recent weak sentiments.

Principal Business

JAPFA is a leading agri-food company that produces multiple protein foods with operations in 5 high growth emerging Asian markets. The Company has a long history and developed core competencies in animal feed production, animal breeding, livestock fattening and consumer food.

Dairy business

This is quite an informational prospectus, so I decided to cut and paste the pictures above. It has a growing diary business in China and supply to leading producers there such as Yili and Mengniu. 

A quick look at trading comps for some of the dairy companies in China is presented below (source from Capital IQ).

You can see that the trading comps are trading at rich valuation in China for Dairy companies from between 20-40x PE. However, having said that, the overall revenue from China and from Dairy is still low, contributing only 3.5% of the Company's topline. If the Dairy business can continue to increase, the valuation of the Company will likely head north as it will become an interesting acquisition target for the Chinese companies.

Animal Protein Business

The Company is also a producer of high quality animal proteins and premium feed. This is the main business line for the company, contributing to the majority of the revenue. It is a low margin but stable business. I believe the Company is trying to position itself away from business into the higher value add diary and consumer food businesses.

Consumer Food

The Company manufactures frozen food in Indonesia and Vienam under the "So Good", "So Nice"and "So Fresh" brands.

Financial Highlights

Revenue has been increasing steadily over the last 3 years but unfortunately, the profits has fluctuated over the years with Q1 2014 coming in lower as well. Having said that, i am pleased to see an increasing EBITDA line over the last 3 years. 

What i like about the Company
  • One of the largest poultry producer in Indonesia
  • Leading premium milk producer in China
  • Emerging market is the right place to be with rising income and a large population
  • Vertically integrated business model allows the Company to extract profits across the value chain
  • Promising diary business in China and with a leading position in Indonesia 
  • Strong growth strategies in key markets to replicate farms and facilities in Inner Mongolia and China
  • Well diversified agri business
  • The independent directors subscribed for the reserved shares in a meaningful way of between 300,000 to 625,000 shares

My Concerns
  • Live stock business while profitable, is always difficult to handle due to factors such as internal controls. 
  • Biological assets are hard to value and "stock take" and any natural disease or man-caused scandals can wipe the entire live stock or affect the company drastically
  • Still primarily an Indonesia firm with >80% revenue derived from there, implying single country risk as well as exposure to Indonesia currency, which can be very volatile
  • Still primarily a "family-owned" by Santosa with a shareholding of > 64%
  • The Company is highly levered with debts bearing interest of between 6-13% and the net margins is too low for my liking. Having said that, if the Company is listed and can refinance its debt at lower interest rates, it will help improve the profitability going forward
  • With all due respect to RSM, the accounts are not audited by a Big 4


The pro-forma NAV is about S$0.66 and the listing price of $0.80 represents a price to book of around 1.2x, which in my view, is a reasonable price to buy for an established business.

Mr IPO's rating

I quite like this sector in which the Company is playing and that we can attract the Company to list here. My key concern will be the highly geared nature in which the Company is taking on debt to expand. To pay 12.75% interest rate on the notes is crazy given the low interest rate environment. I have done a quick and dirty forecast to derive the fair value (which i believe is totally off-mark so read at your own risk).

I have assumed a fair value of 15-18x PE and 6-7x EBITDA which i believe is fair for JAPFA. I am sure if the business is available at 6x EBITDA, many PE firms will be queuing up to acquire the firm. Based on the PE basis, the fair value range comes in at between 91-110c and based on the EBITDA range, the fair value comes out at between 85c to 100c. 

According to the Edge report, Marubeni is coming in as an anchor investor. The original book building range was between $0.75 to $0.87 and the Company priced it a $0.80 eventually given the current IPO sentiments.

Setting the high debts aside, i believe the Company is interesting enough for the medium term with growth initiatives coming on stream. I will give it a 2 Chilli ratings for the medium term but do watch the debt level closely and see if the Company is able to pay down its debt or refinance them at a lower cost.  

Happy Mooing. 

Wednesday, 6 August 2014

A Chinese "Love" Letter

Ok i received a "love" letter in Chinese from my reader but i thought it will be more beneficial to share this with the wider mandarin speaking readers :)


你好,我是IPO Newbies。我现在是sg的pr,家乡来自Johor,Malaysia。
读完了你之前所发表过,关于sg IPO的文章,我有一些疑问,需要你的意见。

1. 我可否用在dbs开的银行户口,输入我之前在UOB Kay Hian开CDP account的,透过dbs internet banking申请IPO?


2. sg的IPO,被分配到的比率,会否有划分singaporean,singapore pr,或是外国投资者呢?(因为我知道的是,马来西亚的public tranche,会有分别出bumi和non-bumi,bumi一般比较容易抽中)


3. 关于你之前"IPOing 101 - how to read a balloting table"帖里的balloting result,

我不是很明白Balloting Ratio的意思 :(
23 : 50,意思是不是说,在50个申请者里面,有23个申请者会被抽中,而一共有1,657个在20,000 to 49,000 share的申请者,被分配到5,000 share,对吗?


No. Successful Applicant代表的是多少个成功申请到的人数,那么我如何可以知道,是一共有多少人,一起在同个组(eg. 20,000 to 49,000)别申请呢?我是不是可以透过Balloting Ratio,自己计算有多少个人,也是跟我一起申请,对吗?

是的. 1,657 divide by 16.6% = 9,981. 大约有9,981申请者申请20,000至49,000股但只有1,657成功抽签到

4. 你之前的"How to increase your probability of get IPO shares from the public tranche"帖,里面提到"No.1 - Apply for at least 50,000 shares but the optimal will be 100,000 shares."。意思是如果该IPO的价钱是$0.25,我可以考虑花$12,500去申请50,000 shares,对吗?


5. sg的IPO,不会说你申请越多shares,中的机率越高,对吗?我知道,如果是马来西亚的IPO,如果申请1,000,000 shares,几乎都是100%被分配到的。


6. 什么网站可以看到最新即将上市IPO的完整prospect?


7. Samudra Energy Ltd,现在可以开始申请该IPO了?

还是不能,因为它尚未注册。 见下图

我没有买卖过sg的IPO,所以心里比较多疑问的 :(
谢谢和期待你的回复 :)


IREIT Global

IREIT Global ("IREIT" or the "Fund") is the first REIT established with the investment strategy of investing in a portfolio of income-producing office-related real estate in Europe. The initial portfolio will be in Germany and the Fund is offering 167.733m units @ $0.88 per unit to investors subject to over-allocation of 11.36m units. The public offer will end on 11 August 2014 at 12pm and starts trading on 13 August 2014 at 2pm. The public tranche will have 11.36m and the placement tranche 156.373m units. The market cap will be $536.1m  

The 4 offices are located in 4 different cities in  Germany and the details of the initial portfolio are listed in the table above.


Given the stability of rental income, the financial statements and forecast is highly predictable which is the beauty of commercial REIT.

The Fund is projected to yield 7.6% in FY2014 based on annualised basis and increase to 8% in FY2015 and FY2016. There will be two distributions each year with the first distribution happening before 31 March 2015 for the period from the listing date to 31 Dec 2014.

ABBA Strategy

The manager will adopt an ABBA strategy where it will seek A class properties in B class cities and B Class properties in A grade towns.


The shareholding is 79% controlled by Mr. Tong from Summit and Mr. Lim from Soildbuild with balance 21% float for the public. Mr. Tong is really the Mr S-REIT and now he wants to conquer Europe as well.

What i like about the Fund

  • The offices are strategically located and are rented out to blue chip clients such as Deutsche Telecom, T-Mobile, Allianz, Ebase and St Microelectronics.
  • Freehold properties that are 100% rented out
  • Long WALE (Weighted Average Lease Expiry) means the income will be very stable
  • Germany has one of the strongest economy in Europe and will continue to lead the recovery there.
  • Management Fee structure is directly linked to the Annual Distributable Income, which creates a strong alignment of interest vis-a-vis a % of NAV for most REITs. 
  • Manager holds about 60% of IREIT
  • 100% payout.
  • No funny financial support or engineering
My Concerns
  • Exposure to Euros given the Singapore investors base
  • Selling at premium to NAV of $0.78 (implying a price to book of 1.128x)
  • Unfamiliarity with German regulations and tax rules may change in Netherlands and Germany regarding taxation and repatriation.
  • Rising interest rate environment

It is interesting to have a pure European REIT listing here. It actually provides an alternative for REIT lovers to diversify out of Singapore REITs. However, as you can see from Croesus Retail Trust, it is not easy for Singapore investors to accept "foreigners". :@P 

Our office REITs in generally, is trading between 6%-7% but i don't think they are truly comparable per se given the differences. I would believe that investors here will impose a "premium" requirement on foreign REITs and expect them to yield between 7%-9% at least.

If that is the expectation, the fair value range for IREIT will fall between $0.81 and $0.98. My personal guess is that IREIT will debut between $0.88 to $0.92 on its first day but don't expect much firework as we are all talking about REIT here and this is an yield play and the counter is listing at a premium to its book value.

I will give it a one chilli rating. Buy only if you like the assets in German or support the German team in World Cup. ^_^ and hopefully the world cup fever is still lingering. Please note that i am asked to take 20 lots. 

Happy IPOing

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