Zico Holdings Inc.

Zico Holdings Inc is placing out 48m shares at $0.30 each for a listing on Catalist. Once again there is no public tranche....SGX are you doing something about this? The IPO will close on 7 Nov at 12pm and will be listed on 11 Nov at 9am.

The market cap is $80.1m based on the IPO price.

Principal business

In case you don't know, Zico is the short form for Zaid Ibrahim. The website is here. It is a very well known law firm in Malaysia with more than 25 years of history.I am surprised that it chose to list in Singapore instead of Malaysia.

It has cleverly restructured itself such that it is listing mainly the Trust and Corporate services, while the offering of legal services will be to the extent it is permitted to do so directly. Otherwise, it will offered by the ZICOlaw Network. The ZICO law network is not part of the listing.

Financial Highlights

The revenue has been growing rapidly for the last 3 years but it is still a lowly RM19m for FY2013. Given this is advisory business, the net margin is high and the profit for FY2013 was RM11.6m

According to the prospectus, Zico is listing at a historical PER of around 23x and will have a market cap of $80m.

Prospects

I am lazy and will cut and paste both the prospects and future plans from the prospectus.

Future Plans

What i like about the Company

• ZICO is a "heritage" firm from Malaysia. 
• The Company has been paying dividends for the last 3 years.

Some of my key concerns

• The Company paid its owners a huge dividend prior to its listing. See picture above.
• Transfer pricing between ZICO Law Network and ZICO Holdings Inc. There is actually a lot of room to "maneuver" in this related parties transactions as they are all "professional services"
• High valuation of 23x PER for FY2013
• You have to continue to rely on the few "key" lawyers to be the rainmakers.
• Malaysia continues to be the key market for the company.
• It is very difficult to forecast the earning as the revenues are services rendered and may or may not be recurring in nature. The breakdown of the revenue is below.

Peer Valuation

One of the only closest peer will be Boardroom Limited. Boardroom has a bigger market cap around $100m and a better PE valuation of around 13.6x. Boardroom has a yield of around 5.4%. Boardroom has very low liquidity.

Mr IPO ratings

I will give it a one chilli rating. Buy only if you like this as liquidity will drve up over time. While the valuation is very high, i understand from sources that the placement was very well received by the friends of ZICO and the books were covered very quickly.

Happy IPOing. Hope there will be something for the public investors soon?