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Saturday, 26 December 2015

Singapore IPOs Tikams for 2015

As we approach the end of 2015, i will continue with the tradition of posting my tikam results.

The tikam post for 2013 and 2014 is here and you will find the 2012 results here.

This year is probably one of the worst as the IPO market in Singapore is in doldrums! I made only $808.82 (at least the numbers look auspicious)

There is only one mainboard listing and the rest are all catalist where you can mainly get shares only via placement. 

I participated in 5 IPOs this year and the results are as follows:

My biggest losses came from CMC Infocomm of $7,983 while the biggest gain was from Jumbo Group of $8,817. CMC was a "painful" incident where I got "played out" by the backers but i don't blame anyone. As i have said before, you have to be responsible for your own profit and loss so don't blame anyone! ^_^ (including those who lost money on my recommendations. @_@)

Hope 2016 will be a better year for everyone, including SGX who is having a difficult time luring any decent companies to list here.

Since we are only 6 days away to 2016, I wish all readers good health and a joyful and bountiful 2016 in whatever you do!

Wednesday, 9 December 2015

BHG Retail REIT - Balloting Results

It was quite rare to see such a "funny" announcement this morning.....

where bookrunner and BHG Retail REIT announced that they have "agreed" to proceed with the offering. This probably means they had 'robust discussion' on whether to proceed with the IPO. ^_^

Placement Shares

I belong to one of the placement holders above... luckily it is for the 1,000 to 9,000 category. DBS even tried to "kill" the placement applicants by exercising its over-allotment issue of 24.636m. This will allow DBS to buy back at a lower price if the share price opens lower tomorrow. It is a "win-win" situation where DBS earns 1% placement fee and then make the difference again if they can buy below the IPO price tomorrow through its stabilization exercise! Disgusting!

Public Tranche

There are only 594 applicants for the public tranche. If you have not heed my zero chilli ratings and apply for the shares - you will definitely get some shares. In most cases, you will get almost full allotment. Even the independent directors and cornerstone investors have to chip in to help subscribe for the shares.

Let's see how the stock price will "perform" on this coming Friday at 2pm. Be prepared for some bloodshed.

Sunday, 6 December 2015


BHG Retail RETI ("BHG" or the "REIT") is offering 151.169m units at S$0.80 per unit. The placement tranche comprises 143.169m units with the retail tranche making up the balance of 8m units. The gross proceeds raised will be around S$394.2m. Based on the IPO price, the market cap is ~$597.2m. The IPO will close on Dec 7 and starts trading on Dec 11.

There is an over-allotment option of up to 24.636m units. This over-allotment option will be a strong indicator if there is demand for the IPO.

Principal business

As the name implied, BHG is a REIT focused (initially) on quality properties in Tier 1 and Tier 2 cities in China. Since investors in Singapore are very familiar with REIT, after some of the basic information, I will jump straight into what i think BHG.

Initial Portfolio

The initial portfolio comprises of 5 properties listed below with valuations by DTZ and Knight Frank. It is good to see that the company is valuing it at >$$30m below the market value. 

Valuation of IPO Properties

It is good to note that they are not pricing the IPO at the maximum valuation.


The forecast below for records purpose.


The distributions will be made semi-annually. 

The projected yield for FY2016 is around 6.3% but that is because strategic investors have waived their entitlements. The yield would drop to 4.5% if there had been no financial engineering! (I don't like it!) This financial engineering will be in place all the way till 2021!

What I like about BHG

  • China will be the biggest consumer market by 2018 and with rising income and middle class, consumer expenditure will drive the China economy. The relaxing of the one child policy is also positive for this sector
  • Experienced management team
  • Strong sponsor in BHG. They have 12 other malls which they own and another 26 managed by the Group
  • Some decent cornerstone investors such as China Life, China Hi-Tech Holding Company, China Merchant Banks
  • BHG didn't max out the valuation and mark it up and based on existing valuation, there is modest leverage around 34% with more headroom if required for acquisition
  • Strong pipeline with 12 properties identified under ROFR which will triple BHG's size
Some of my concerns
  • Competitive landscape – In my limited understanding, while each property is unique and location dependent, the landscape for retail is pretty competitive
  • Changing consumer habits. With investors making purchases online via smartphones, a physical store may become obsolete over time and we can see that happening in China with rising online sales
  • Financial engineering in increasing the distribution yields. Without the financial engineering, the yield for FY2016 would drop from 6.3% to 4.5%! Yucks.
  • The manager has elected to receive the fees in units, which would further dilute the yield from FY2017 onwards.
  • While BHG group and its affiliates will continue to own about ~31.5% of BHG REIT, the alignment is not as strong

  • Potential conflict of interests with other sponsor properties
  • The properties have less than 32 years of lease tenure balance 


According to REIT data, Capital Retail China is trading at 7.122% with gearing of 28.5% while Mapletree Greater China Trust is yielding 7.52% with a 41% gearing.

In my view, the above two REITs provide better value propositions then BHG REIT in terms of dividend yield but definitely Capita Retail China Trust has a better debt ratio than Mapletree. Assuming BHG REIT trades to a yield of 7%, the fair value range will be between 51-72 cents

My Chilli ratings

Considering this is the first mainboard IPO for Singapore Exchange for 2015, it is hugely disappointing. I will give it a zero Chilli rating based on the above reasons. 

Do note that i am vested.

Thursday, 26 November 2015

Axcelasia Inc

This is for record purposes only. Sorry for the late report as there is no public tranche and i am not vested

Axcelasia Inc ("Axcel" or the "Company") is offering 47.52m placement shares at $0.25 each where 35.52m will be new shares and the balance vendor shares. The IPO closed on 25 Nov 2015 and will start trading on 27 Nov 2015. The market cap is around $40m based on IPO price.

Principal Business

The Company and its subsidiaries provide integrated professional services to government-linked entities and corporations in tax advisory, business consultancy, enterprise management system and business support.

Key Strengths

According to the prospectus, the Company has the following key strengths:
  • Good track record
  • Integrated service provider
  • Flat management structure
  • Experienced and dedicated management team
Future Plans

The Company intends to expand in Malaysia and ASEAN region, enhances its range of professional services and support infrastructure.

Financial Highlights

This is a "human business" where revenue hits RM 8.3m in FY2014 with a profit before tax of RM 1.59m. The revenue and income spiked up to RM16.6m and RM6.05m for the 6 months ending HY2015

Based on the exchange rate of 0.33, the adjusted EPS for HY2015 is around 3.77 x 2 x 0.33 = Singapore 2.49 cents. That translate into a listing PER of around 10x but frankly i am not privy to 2H results and will be cautious on such projections.

What I like about the Company
  • Asset light business but having right management is critical as it is an advisory business
  • Shareholders are tightly held by 3 key individuals, which means interest is aligned.
  • Operating cash flow positive company
Some of my concerns
  • Weak RM currency will be a drag on reported earnings in SGD
  • Unpredictable earnings. A big question about my full year forecast as fees may not be stable
  • A small cap company listing at rich historical valuation to its NAV

A similar listed company is Zico Holdings Inc, lised in Nov 2014. It is still above its IPO price but trading at ridiculous valuation.

Mr IPO ratings

I will give it a one chilli rating given its relatively small market cap and "unexciting" business proposal but given the low number of shares and the quality of institutional investors, the Company may see its share price well controlled!

Placement results

The list of placement investors seemed quite well received! Good luck to those who bought the shares.

Sunday, 22 November 2015

The Trendlines Group Ltd

The Trendlines Group Ltd ("Trendlines" or the Company") is placing out 75.76m Placement Shares at 33 cents each for the IPO. It will be a pure placement tranche with no public shares and the market cap is around $168m. The IPO will close on 24 Nov and be listed on 26 Nov 2015.  

What does Trendlines do?

Trendlines is basically an incubator based in Israel. It creates and develops medical and agricultural technological companies with a view towards a successful exit in the market place. The exits of these companies can either be a sale or IPO of these companies. The youtube video is here if you are interested.

Investment Process

This is how the investment process of the Company looks like. Trendlines will invest up to $5m in a company with an expected exit horizon of 6 years or less.

I am not sure if you are familiar with the private equity market. There are many different "styles" or strategies, ranging from:

Seed (pre series) à Venture Capital (Series A and B) à Growth (Series B to D) à Pre-IPO à Buyout

The risk and reward profile is somewhat correlated with the different strategies, with seed having the highest risk but usually highest returns (if the investment thesis pans out).

Competitive Strengths

I will just "copy and paste" from the prospectus on its key strengths.

Interesting Cornerstone Investor

The IPO is supported by B.Braun, a private unlisted strategic investor based in Germany, to the tune of $7.1m or 21.515m shares. The website is here.  I am amazed that this Company was founded in 1839, employs 54,000 employees globally and generated sales of €5.43b but remains an unlisted company!

Portfolio Companies

The portfolio companies are in very interesting medical and agricultural technology space. These are currently very hot sectors to be in. Each portfolio company will be an interesting IPO candidate if it can be listed and can provide potential feedstock to our Catalist market here. Perhaps SGX is even more excited about bringing Trendlines to Singapore vis-à-vis other companies.

The list of top 10 portfolio companies are presented below with a nice vintage diversification ranging from 2008 to 2013. Some of these companies will be "ripe" for harvesting further down the road.

Track Record

In a nut shell, the Company is like an "investment holding company". In most cases, it is typically a listing of the "fund manager" except in Trendlines case, it is the fund manager plus the fund itself since it does not manage separate funds. This is a huge distinction which you need to make (which I will explain shortly).  Anyway, the track record is presented below. It is interesting to note that it has sold companies to acquirers such as Baxter International and made ROIs of up to 67x.

What is the difference between a typical fund manager and Trendlines?

It is important to distinguish the different operating model between a fund manager and Trendlines. A typical fund manager manages funds and earns a management fee (2%) and carried interest (20% of cap gains) from the funds. These funds typically have an investment period of 3-5 years and a fund life of 10-12 years. Trendlines operates more like the "fund" and earns returns from the portfolio companies directly either through the dividends it receives or the capital gains when it sells the company, except in this case, the management fees is the "salaries paid" and it doesn't have a "fund life" per se.

Financial Highlights

The financial highlights are presented above. As highlighted above, earnings can be very lumpy due to different timing in realizing exits and potential write offs.

Pre-IPO investors

The pre-IPO investors consist of the usual players such as Alan Wang, Jeremy Lee and Tommy Goh. They bought in at around 21.45 cents but will be locked up for up till 12 months. I understand from the bookrunners that the IPO tranche was very well supported by the existing pre-IPO investors. In fact, almost all of them "doubled down" their stake by asking for more IPO shares and were cut back. It will be interesting to see if they can perform some local magic here…

What I like about the Company

  • Israel is the 'hot bed' for technology companies and the Company is well positioned to incubate these companies
  • I like the sectors in which Trendlines is focused in – healthcare and agricultural technology
  • Strong management team and track record with Trendlines Medical being named "best incubator" twice
  • Exporting its incubator business in Singapore and China. China should be a very exciting market if the Company can export its business model there
  • Good cornerstone investor in B. Braun, a privately held global company with sales of more than €5.43b
  • The IPO price is supported by the NTA of 24.39 cents (Price/NTA of 1.4x) with interesting pre-IPO investors
Some of my concerns

  • The top 2 executives are very well remunerated and this may cause a drain on the cashflows, which are uncertain and depends heavily on the exit windows. The Company has been having negative cashflows since inception!
  • Government funding on portfolio companies may stop in future
  • Unpredictable income and profitability. It is very difficult to project earnings for this company due to its business nature and a lot is derived from fair value changes. You "can't eat" fair value appreciation
  • It's not easy to fair value the investments
  • Israeli government sponsorships may dry up one day or that the company may not win the mandates. This risk is probably low at this juncture
  • Early stage investments carry a very high risk but also comes with high rewards
  • Disperse shareholding structure with the top 2 executives owning less than 10% of the Company
Peers in Singapore

The peer I can think of is Hotung Investment Holdings Limited but the company is not "trading well" here currently with a 0.42x price to book. If Trendlines trade to that level, it will be below water

My Chilli ratings

Luckily there is no public tranche. Frankly I couldn't decide what chilli ratings i should give. On one hand, I like the sectors in which the Company is targeting. The list of pre-IPO investors and the cornerstone investor Braun, also help instill some confidence in the IPO. You may be able to see some first day "magic".

On the other hand, I am wary of the market sentiments as well as the poor peer performance of Hotung. I am also wary of the unpredictable profitability and negative cash flow since inception. Hopefully it will be at the infection point to be cash flow positive.

Based on the above reasons, I will give it a 1 Chili rating. Do note that I am vested...

Saturday, 7 November 2015

Jumbo Group Limited - Balloting Results

Jumbo announced that its shares was 8x subscribed. The 2m public tranche was >300x subscribed so it will be a tough act to get. 

Jumbo is indeed very hot... Looking at the list of institutional investors. No wonder the 2m public offering is only for making sure there is sufficient headcount. The list of institutional investors (besides the Cornerstone we already know) are listed below. 

The investors are mainly reputable "long only" asset managers such as Fidelity, Lion Global and Nikko. These bode well as for Jumbo as they were not deterred even though it is a Catalist board listing!

As for public investors, I am afraid it is really difficult to get. Investors who apply for 50 lots will get a 3:99 chance and be allocated 8,000 shares. Thank your lucky stars if you can get it. 

I am expecting a nice big pop on Monday  .

Happy Jumboing

Sunday, 1 November 2015

Oxley Holdings Limited - 5% 4 Years

Oxley Holdings Limited ("Guarantor") is offering up to $125m of 4 years bonds at 5%. The key terms are as follows:

The key terms are as follows:

Amount:  Up to S$125m but can be upside to $300m if oversubscribed

Interest rate: 5% fixed

Interest Payment date:  Twice a year on 5 May and 5 November

Maturity date:  5 November 2019

Manager:  DBS Bank

Ratings:  Not rated

CPF application: Not allowed

SRS application: Not allowed for initial application but may purchase post listing

Minimum application: S$2,000 for public tranche and $100,000 for placement tranche.

Timeline:  The offer will close on 3 Nov 2015 at 12pm.

Oxley Holdings Limited

The Company is listed on Catalist on 29 Oct 2010 and transferred to the main board on 21 Feb 2013. The 'rags to riches' story of Ching Chiat Kwong is an interesting read. He is partly responsible for the "shoebox" craze in Singapore and he followed up with big bets at the Royal Wharf in London in 2013. I would agree that he has really "bet" well in the past but will luck run out of him one day given that his Company is really over-levered?

According to an article in EDGE last week, Oxley has pre-sold more than 2,000 residential units at the Royal Wharf and the first block will attain "TOP" in May 2016 where Oxley can get the remaining 80% from the buyers. Phase I will be completed by end 2017.

The same article mentioned that Oxley has unbilled revenue of $1.7b from oversea projects and these can be recognised when the projects are completed. In Singapore, it has $1.6b unbilled revenue of which more than $500m comes from Oxley Tower - which should be completed by 2017.

You can say that Oxley is a risk taker and one of the first movers in Cambodia and Myanmar. You would have see his advertisements of the Myanmar project at the PEAK, located with Shangri-la. His upcoming portfolio include hotels in Japan, Singapore, Phnom Penh and KL.

Oxley is also considering listing its property business in Malaysia to raise more equity.

 Financial Highlights

The Company seemed to be highly profitable but its cashflow in FY2015 has been financed by debt and only turned cash flow positive from operating activities in 1Q this year. 

The Company is highly leveraged with bank borrowings amounting to S$2.4b as of 1Q 2016.

Mr IPO's views

If i am to take a bet on Oxley, i rather invest in Oxley than the unsecured bond where the risk / reward just doesn't seem to make much sense. I am locked up for 4 years and earned a fixed interest rate of only 5% that somewhat doesn't commensurate with the risk that i am putting on given that the bonds are unsecured and will be ranked alongside all other unsecured debt. 

Personally, I will give it a miss. You can always purchase from the open market when there is better clarity on the success of some of its upcoming projects. The bond price is not going to run away from you in a rising interest rate environment.   

Saturday, 31 October 2015

Jumbo Group Limited

Jumbo Group Limited ("Jumbo" or the "Company") is offering 88.23m new shares at 25 cents each where there is only a meagre 2m shares available to the public! The rest of 86.23m shares will be distributed through placement. The IPO will close on 5 Nov 2015 at 12pm and starts trading on 9 Nov.

Separate from the offering, it has signed up Cornerstone Investors to subscribe for 72.1m cornerstone shares who will together, own 11.2% of the enlarged company. The market cap post IPO will be around ~S$160.3m.

Writing this IPO post just before dinner was not a wise decision as i became quite hungry thereafter, especially just coming back from an overseas trip without local food.


I don't think Jumbo needs much introduction as it is a well-known name locally. It was first established in 1987 and currently operates 14 F&B outlets in Singapore with 2 in Shanghai, China and a 3rd one opening in Jan 2016.

While Chili Crab is probably its most famous seafood dishes, it now owns a portfolio of restaurants such as JPOT, Ng Ah Sio Bah Kut Teh and Chui Huay Lim Teochew Cuisine.

Financial Highlights

Revenue has been increasing over the last 3 years with profit rising to $13.7m in FY2014. The revenue continue to grow healthily to $62m in 1H 2015 but profit grew to $6.871m (pro-forma). 

Assuming the service agreement has been in place and based on the enlarged share capital, the Company is listing at a PER of around 12.4x using the pro forma EPS for FY2014.

Assuming net profit either doubled from first half or increased by 9% (using the first half growth rate) from FY2014, the full year profit will likely be between $13.7m to $14.98m. This translates into a forward EPS range of between Singapore 2.13 to 2.33 cents and a forward PER of between 10.7x to 11.7x

Business Strategies and Future Plans

The Company intends to use the net proceeds raised to:
  • Open at least 4 outlets in PRC and Singapore within the next 24 months
  • Have more central kitchens
  • Expand business through M&A, JV and strategic alliances

This is the shareholders list post IPO. The family continues to own 57.9% of Jumbo. There are two significant shareholders that emerge. One was Heliconia Capital and the other was Ron Sim (Osim's founder). They were also the cornerstone investors. Heliconia is wholly owned by Temasek and provides growth capital to Singapore SMEs while Ron Sim is one of the richest man in Singapore.

Dividend Policy

Jumbo intends to pay no less than 30% of its net profit attributable to Shareholders in FY2016 and FY2017. Based on projected EPS of around say, 2.13 cents, the dividend yield is around, 2.5%.

What I like about the Company
  • Well known and established brand in Singapore
  • JBO has undertaken 24 months moratorium (from the usual 12 months) and Cornerstone investors for 6 months
  • Profitable, highly cash generative and dividend-paying business
  • Reputable cornerstone investors in Heliconia and Ron Sim 
  • Expanding in China seemed to provide a new engine of growth 
Some of my concerns
  • Growth for Jumbo in Singapore likely to be limited. Personally, i had not ate at Jumbo restaurants for the last 12 months
  • Family members continue to play key roles in the Company
  • Payment of $51.7m conditional interim dividend. While it is meant for "restructuring", the prospectus wasn't very clear whether it is used to acquire the businesses or to pay out cash to the existing shareholders.
  • Personally I don't like this business where rental and labor costs are rising rapidly coupled with slowing economic and tourism growth in Singapore
  • Economic slowdown in China when consumption at restaurants are on the decline
Peer Valuations

The listed peers are trading at very rich and ridiculous valuation. Some of them are not very profitable.

Assuming a 15x PER, the fair value range is between 32 to 35 cents, representing >20% upside from its IPO price.

My Ratings

Personally I don't like this sector but i understand from people in the know that Jumbo's IPO is very chilli crab hot and that the Cornerstone Investors had their allocation cut as well. My allocation wasn't spared as well and I was cut by 20% :-P

Heliconia and Ron are probably long term investors and that had somewhat help "validate" the long term growth plans. As such, i believe there will be a nice pop on the first day.

I will give it a 3 Chilli ratings for this IPO but 2 Chilli over the longer term and I won't overstay my welcome.

Sunday, 18 October 2015

Perennial Real Estate Holdings Limited - 4.65% 3 years

Perennial Real Estate Holdings Limited ("PREH" or "Issuer") is offering up to S$150m of 3-year bonds with an interest rate of 4.65%. The OIS and product highlight sheet can be found here. You should read at least the product highlight sheet ("PHS").

The key terms are as follows:

Amount:  Up to S$150m

Interest rate: 4.65% fixed

Interest Payment date:  Twice a year on 23 April and 23 October

Maturity date:  23 October 2018

Manager:  DBS Bank

Ratings:  Not rated

CPF application: Not allowed

SRS application: Not allowed for initial application but may purchase post listing

Minimum application: S$2,000 for public tranche and $100,000 for placement tranche.

Timeline of Key Events

Background Information on the issuer

I will not repeat what you can find in the PHS or OIS. In a nutshell, PREH is a property developer and investor with mature and developing properties in Singapore and mainly China. It has a "blue chip" name of local tycoons supporting PREH, such as founders of Wilmar and OSIM.

Nature of bonds - what exactly are you looking for?

When we invest in bonds, we are trying to solve for the answers to the following questions:
  1. Do I like the coupon rate?
  2. Can i afford to hold the bond till maturity?
  3. Can the Company pay me the regular interest coupon twice each year?
  4. Can the Company pay me back my principal at maturity?
If all your answers to the above questions are "yes", then the bond is suitable for you.

How is PREH expected to be performing over the next few years?

PREH is expected to do well for the next 3 years, experiencing high growth every year. CIMB has a Add rating to PREH. The research reports are attached here and here.

You can see above that while equity investors is expected have a nice share price upside but their expected dividend yield is less than 1%! 

Debt level

The Company is highly geared. I am not going to pretend that it is not. Having said that, i believe the current debt is manageable. You can see from the long term solvency ratios below that the Company is very highly geared.

Mr IPO's views

I am currently trying to construct a bond portfolio to generate passive income. I will share that in my SRS blog shortly

What i like about PREH bonds is as follows:
  • Strong management with good track record
  • PREH is forecasted to do well for the next 3 years (see research report)
  • Assets with SGD inflow will help hedge the bonds naturally. RMB is also expected to be stable against the SGD
  • 3 years fixed rate of 4.65% sounds about right. I can redeploy the cash after maturity if interest rate goes up by then
My key concerns will be the over-geared balance sheet but i am optimistic that 50% LTV is adequate to protect my unsecured bonds.

If you don't have the holding power, then this bond is not for you. 

Happy Bonding. Mr. IPO is vested through the placement tranche.

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