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Thursday, 29 June 2017

Shopper360 - Placement Results

Shopper360 Limited ("Shopper360" or the "Company") announced that is IPO attracted strong interest from institutional investors. There is no public offering (which is why it can't get the highest rating from me).

Ms Chew elaborated, "As a listed company, we are now in a better position to fortify our market position and stay ahead of the competition. The increasing importance for shopper engagement and experience, bolstered by a proliferation of brick-and-mortar retail stores, bode well for us, as the synergistic nature of our business segments enables us to provide integrated solutions to our customers at every touch point – from pre-store, in-store to post-store. We also have a strong pipeline to introduce new innovative mediums to our existing suite of services, and are well-placed to capture opportunities in the digital economy."

The shares were placed out to an interesting list of investors, including Asdew (Alan Wang), Island Asset Management and BTS Group. Interesting to see a Thai public listed company venturing into this space, hopefully it is for strategic reasons lol. I am sure many of you have taken BTS before while in Bangkok.


Good luck to those who managed to get some placement shares.

Happy shopping.

Sunday, 25 June 2017

Shopper360 Limited

Shopper360 Limited ("Shopper360" or the "Company") is placing out 38m placement shares (comprising 18m New Shares and 20m Vendor shares) at $0.29 each for a listing on Catalist. Since there is no public tranche, my ratings is probably less meaningful to majority of the readers. The IPO will close on 28 June at 12pm and starts trading on 30 June 2017 at 9am. Based on the IPO price, the market cap is around S$33.2m

Principal Business

The Company is a well-established shopper marketing services provider with 30 years of experience in the retail and consumer goods industries in Malaysia. It connects its customers with retail partners, namely the hypermarkets, supermarkets, pharmacies and convenience stores. Shopper360's customers base include MNCs such as Nestle, F&N, Samsung and its key retail partners include Giant, Cold Storage and Aeon.

The Company seems to be able to provide the entire value chain from "in-store advertising and digital marketing business" through Pos Ad and Shopwave to "retail force management" via Jump Retail and "Sampling Activities and Events Management" through Tristar Synergy

Financial Highlights

The Company's revenue showed strong revenue growth (CAGR of 29%) of RM 68.4m from FY2014 to RM113.5m in FY2016. The 1H FY2017 continue to demonstrate strong period-on-period growth of 23%. Profits grew from RM5.3m in FY2014 to RM13.3m in FY2016 and 1H FY2017 profits continue to grow strongly by 43% to RM3.5m.

Extrapolating from this, assuming full year net profit grow by a more conservative 30%, the profit for FY 2017 will be around RM8.7m (excluding non recurring gains) x 130% = RM11.3m

Projected FY 2017 EPS = 3.94 Singapore cents x 61% recurring portion x growth of 30% = Singapore 3.12 cents. That translate into a forward PER of 9.3x

Fair Value

It is not easy to find comparable for this company as the business model is pretty unique. Assuming a PE multiple of 11-13x (which i think is reasonable), the fair value is around 34 cents to 40 cents.

Dividend Yield

The Company intends to pay a dividend of no less than 20% of profits to equity holds for FY2017 and FY2018. Assuming EPS is 3.12 cents, that will translate into a yield of 2.15%

What I like about the Company
  • Established Track Record since 1980s - i like the fact the this is not a "fly-by-night" company. It was established since 1980s and was a pioneer of in-store advertising. It was awarded the Enterprise 50 award twice and in the top 10 SME100 in Malaysia in 2014
  • One-stop shopper marketing services group - The Company is able to provide a full suite of advertising, marketing and shopper engagement services to its clients
  • Reputable clientele and retail partners - I like the clientele, that seemed to be made up of brand leaders such as Nestle, Dutch Lady, Samsung, Fonterra, etc This will reduce any "default" risk from non-paying clients
  • Strong revenue and profitability growth over the last 3 years - I like Company showing strong growth trajectory and it seems like Shopper360 is firing all cylinders on both revenue and profits
  • Cash flow generative and Dividend paying  - The company is highly cashflow generative and has positive operating cash flows for the last 3 years. The Company intends to pay no less than 20% of its net profits as dividends and i have a preference for dividend paying company as it demonstrates good capital discipline and positive cashflows
  • Interesting shareholder  - Besides the founders, KPF (part of FELDA) owns about 20.29% of the Company post IPO. KPF is one of the oldest co-operative in Malaysia and its presence should hopefully provide some comfort and attract institutional investors to the IPO

Some of my concerns
  • Malaysia - The Company is exposed primarily to the political risk and economic performance in Malaysia and the ever depreciating MYR against SGD is always a key concern as it reports its numbers in SGD. On a related note, i am not sure if the Company is able to scale its business outside of Malaysia in the long term
  • Changing demographics and shopping behavior over the longer term - While this may not be a concern in the near term, over the longer run, malls in Malaysia may go the way of USA and China where shoppers go online and less to "bricks and mortal". The Company would need to find ways to continue to be a key partner for brands in the digital space, otherwise, it will overtime, lose its positioning among brand owners
  • Vendors are cashing out - while my preference is that vendors don't cash out at IPO and stay vested in the Company for at least one year post IPO (of course, if they are  quietly using the proceeds to help support the price post IPO, then i will keep quiet lol). The comfort is that the founders are not cashing out but it is KPF, the co-operative that invested in the company in 2006 and 2009
  • Small Cap company
My Chilli Ratings

I quite like the growth trajectory and the unique business model of the company that is highly cash generative. The IPO valuation also looked fair to me at less than 10x PE multiple. My concerns will be its "Malaysia-centric" focus and the depreciating MYR. It wouldn't be fair for me to give it a one chilli rating as i do find the Company attractive enough. 

While my chilli rating does not matter since it has no public offering, i think it deserve at least a 2 chilli rating. Do note that i am vested from the placement tranche.

Friday, 16 June 2017

HRnetgroup - Balloting results

HRnetGroup announced strong demand for its shares which was 15x subscribed. The list of cornerstone investors were pretty impressive as well.

According to a DB's memo to client, HRnetGroup priced its IPO at the top of the price range and at a premium to its peers on 2017 PE basis. There was a total of 7 cornerstone investors including Fidelity and Aberdeen who have not participated as cornerstone investors in Singapore since 2014.

The balloting table is below for your reference:

Wednesday, 14 June 2017

World Class Global - balloting results

Word Class Global announced that it's IPO was 2.1x subscribed and also triggered the over-allotment. 

The balloting table is presented below. Investors had a 50% chance of getting the shares.

Mr Ng Sheng Tiong, Executive Director and CEO of WCG, commented, "We are highly encouraged by the positive response we have received for our IPO. This clearly demonstrates the strong confidence that the investors have in WCG's investment story. With the success of our IPO, I am optimistic that we are now well-placed to develop our property assets in Australia and Malaysia to their fullest potential."
 Good luck to those who got it... hope the founders support the shares after "cashing out" ...

Tuesday, 13 June 2017

Poll results - HRNetGroup

As requested - poll results for the first 100 respondents. I may consider subscribing for survey monkey next time 😊

Saturday, 10 June 2017

HRnetGroup Limited

HRnetGroup Limited ("HRnet" or the "Company") is offering 89.482m shares for its IPO of which, 85.682m shares are via placement and 3.8m shares for the public offering. The IPO will close on 14 June at 12pm. The Company will have an over-allotment option of up to 11.1m shares in the event of strong demand.  The IPO will close on 14 June 2017 at 12pm with a market cap of approximately S$900m. Finally, we see a mainboard listing on SGX after so long! SGX must be heaving a sign of relief.

Principal Business

HRnet is one of the largest Asia-based recruitment agency outside Japan with a strong dominance in Singapore. The Company operates in 10 Asia growth cities with a highly diversified base of over 2,000 premium clients. The Company said it has "104" clients out of the Fortune 500 list.

Some of the key brands under HRnetGroup are as follows:

Financial Performance

The Company has grown its revenue strongly from S$324m to S$365m over the last 3 years and net profit has grown from S$37.9m to S$48.4m over the same period. The EPS, based on post IPO number of shares, for FY2016 is Singapore 4.06 cents.  That translate into a listing PER of around 22x. 

What i like about the Company
  • Largest Asia-based recruitment agency in Asia Pacific (ex-Japan) - The Company currently operates in 10 Asian based growth cities and is the highest revenue generating company in the Asia Pacific. The Company has a strong base in Singapore where it generated 57% of its revenue. This will provide the stable base from which it can expand overseas

  • Well diversified customer and revenue bases - That helps reduces the dependency and over-reliance on key policy matters. It is interesting to note that no single sector account for more than 16% of the Company's revenue
  • Strong track record - The Company has grown strongly over the last 24 years. Revenue grew from S$94m in FY2006 to S$48m in FY 2016 over the last 10 years. In fact, the Company led by Peter Sim, has been growing the Company and leading it to greater heights over the last 20 years. It is hard to imagine that he started out as a civil servant and he has done very well for himself, including bulldozing its competitors over the last 10 years!

  • Strong cashflow business - This is a highly cash generative business with positive cash flows from operating activities of more than S$53m in FY2016. In fact, i don't think the Company really need to list other than for the fact that the founder is 60 years old and listing can help ensure he builds a lasting legacy to either sell or pass on to the next generation
  • Dividend paying - HRnet intends to pay out 50% of its net profit after tax for FY2017 and FY2018 as dividends. Assuming EPS grow by 7% from 4.06 to 4.34 cents, that will translate into a dividend of Singapore 2.17 cents, implying a relatively decent yield of 2.4%
  • Strong list of pre-IPO and cornerstone investors - It is good to see Heliconia, as well as asset managers such as Aberdeen Asset Management, Affin Hwang, Credit Suisse and en-Japan, FIL, TechnoPro etc agreeing to be cornerstone investors. This bodes well for the Company and will probably help ensure there will be strong market support post its listing. The fact that HRnet went bookbuilding at between 80c to 90c and closed the book at the top range of the bookbuilding range means that demand for the IPO is extremely strong.
 Some of my key concerns
  • High valuation - Investors should be aware that the issuance is at a huge premium over its NAV as well as at 22x PER. This is an asset light business and investors are paying for the human capital that generates the profits
  • Ability to retain talent - The ability of the Company to retain talent is critical as that is where the profits are generated. While the prospectus mentioned that they have a strong incentive scheme that aligns the interest, nevertheless, this is a pretty mobile and relationship business. There is nothing to prevent employees from leaving the Company and starting a new recruitment business elsewhere
  • Tightly controlled company - With 73.35% controlled by SIMCO Global Ltd and the balance held by cornerstone or strategic investors, the public only hold 8.85% of the Company. Investors will have expect that liquidity will dry up over time and to trust the management to instill good corporate governance at the Company
  •  Execution risk - It is always easy to sell the North Asia story but definitely not easy to "carry it out".  The ability of HRNet to execute its stated strategies in North Asia will be the key risk for me
My Fair Value 

It is not easy to find local comparables in this sector as HRnet is a market leader in Singapore and Asia. In fact the study from Frost showed that it is a better run company vis-a-vis its peers in Asia. It is also interesting to note that en Japan Inc and TechnoPro are taking cornerstone stakes in the Company. This is probably a strategic investment for them, with a view to acquire HRNet in future should the Sims decide to cash out. 

This is definitely not a value buy but an opportunity to invest in such quality company is also hard to come by in Singapore. In this regard, there should be a "scarcity" premium. Assuming an EPS of 4.34 for FY2017 and a PER range of 28-32x, the "fair value" should be around Singapore 121 to 138 cents. 
Assuming a lower PE range of between 22-25x, the fair value should be 95 cents to 108 cents.

My Chill ratings

Given that it is priced at the top end of the range, with a strong set of cornerstone investors and richly traded peers, i believe HRnetGroup will debut very well. I quite like the Company for the reasons provided and would have given it a 3 chilli rating if not for the rich valuation. It is a 2 chilli rating for me and investors who apply at the ATM should be able to exit at a good profit.   

Happy HRing

Friday, 9 June 2017

World Class Global - Poll results

Here is the poll results for the first 100 respondents for World Class Global.

World Class Global Limited

World Class Global Limited ("WCG" or the "Company") is offering 136m shares in the IPO @ 26 Singapore cents each for a listing on Catalist. New shares of 100m and vendor shares of 36m will be sold to the investors. There will be 3.98m shares for the public offer and 132.02 m shares via placement. There will be an over-allotment option where underwriter can offer an additional 10.8m shares if the demand is good at the IPO. The offer will close on 13 June 2017 at 12 pm.
Principal Business
WCG is a real estate company that undertakes property development and property investment in major cities in Australia and Malaysia. It was spun out from its SGX-listed parent – Aspial Corporation Limited.
Its property development projects include Australia 108 and AVANT in Melbourne, Australia. The Company also hold 28 properties in Penang, Malaysia, which comprises mainly shop houses. The Company intends to develop the land parcels or refurbish the properties.

Launched Projects


While WCG mentioned about its launched projects and the above chart on the right showed how much "capital value" has accredited vis-à-vis the purchase price, it is still not easy to figure how the eventual profitability of the projects and how much "profits" is coming on stream at completion and handing over to investors. Similarly, it is challenging to ascribe any value to the projects yet to be launched.

Projects to be launched

Financial Results

The Company has been loss-making for the last 3 years because the accounting rules in Australia does not allow for progressive recognition of revenue for the projects. As such, profitability will be lumpy as it can only be recognised when the "keys" are handed over to the buyers. Based on the projects shown, the first year of profit should come when the first project, Australia 108 is delivered.

The NAV per share of the Company is 11.4 Singapore cents after taking into account the estimated net proceeds of the IPO and based on post invitation share capital of 905.7m shares. This is at a huge discount to the IPO price of 26 Singapore cents. Investors are paying for "future earnings" and capital appreciation of its properties.

Use of Proceeds

The majority of the issuance is used towards the acquiring and construction of properties.

What I like about the Company

·       Established and experienced management team – The Company has proven that it is able to deliver by launching projects in Melbourne, Australia and pre-sold more than 90% of the units.
·       High % of Pre-sold units – The Company managed to sell more than 90% of its residential units. Assuming all the purchasers are "credit worthy" and able to complete the sale, this removes the "sale" risk and the remaining will be execution risk depending on whether the Company is able to keep its costs in rein. In other words, profits are "locked in" as long as the cost of the projects don't over-run. It is a good to know that there had been no instances of cost overrun in the history.
·       Dividend paying – WCG intends to pay dividend of up to 50% of its net profit for the year ending 31 Dec 2019 and thereafter.

Some of my key concerns

·       Unclear tax and regulatory regime – The Company spent so much time informing investors that it could potentially be subject to Australia's investment regime and the various implications alongside. While I am still clueless whether investors in WCG will be subject to any taxation, it highlights the risk of government intervention in this sector, be it through taxation or measures to control demand and supply
·       Lumpy earnings – In most jurisdictions, the accounting rules allows for revenue recognition using % of completion method. In Australia and in the case of WCG, the rules created 3 full years of losses. Earnings will be pretty lumpy given most of the high value projects are in Australia. It also means that WCG is unable to "collect cash" from investors based on the % of completion.
·       IPO price at premium over its NAV – The IPO price of 26 cents is a very high premium over the NAV of 11.4 Singapore cents. Investors are paying to participate in the ability of the Company to generate future earnings. This represents a price to book of 2.28x
·       Highly levered company – Property development requires a lot of financing and as of 31 Dec 2016, the Company's gearing ratio (debt/equity) is around 5.6x. Any material rise in interest rate or liquidity freeze will impact the Company severely
·       Forex risk – The Company will be affected by currency movements in AUD and MYR. AUD has always been relatively stable whereas MYR has been on a downtrend against SGD for the longest time
·       Imbalance of cash flows – The developers receives a "deposit" from the buyers (say 20%) and have to finance the cost of construction through bank leverage, it can only collect the remaining balance at the completion of the projects. While this creates an incentive for developers to complete the projects quickly, it also means that the WCG has to finance the construction, resulting in negative cash flows
·       Vendors cashing out at double the cost – I am not sure of the background of why Koh and Ng owns 5% each with Aspial holding 90% in the first place and I am not sure why they are even allowed to divest part of the shares at the IPO! Shouldn't it be pro-rata with Aspial at least too? In any event, the founders are "cashing out" just doesn't sound right to me. I certainly hope they are using the cash to support the IPO…
·       Why is the Singapore property development business not part of WCG? – I have no idea why this is the case.

Fair value

Look at price to book or PE multiples of WCG against the likes of UOL, City Development and Capitaland, the Company looked over-valued in all aspects.


I am quite tempted to give it a zero chilli rating based on the above fundamental reasons, however, I understand the placement is probably placed out to close F&F (friends and family). Given the positive IPO sentiment and possibly tight placement, it will probably debut above water.  

Please note that I have taken a very small tranche to "test out" Zico Capital but on hindsight i should have given it a miss as i was too busy to do the analysis. Fingers crossed!

Wednesday, 7 June 2017

Sanli Environmental Limited - Balloting Results

Sanli Environmental Limited ("Sanli" or the "Company") announced that it received overwhelming investor interest in its IPO. The key takeaways as follows:

  • IPO was 12.8x subscribed
  • Pre IPO investor, Heliconia Capital, increased its shareholding to 7.97% (A good sign)
  • ICH Gemini Asia Growth and Jeremy Lee Seng Poh subscribed for 17.2 placement shares
"Commenting on the robust support for Sanli's IPO, Mr Sim Hock Heng, CEO of Sanli, said, "We are encouraged by the overwhelming support we have received from our institutional investors, including our anchor investors, and the investing public. This is testament to investors' faith in Sanli's robust track record and the bright prospects of the water industry. We look forward to bringing Sanli to its next level of growth with our new status as a listed company, and we are glad to have the investing public join us in this new chapter of our growth story."

The balloting table is below:


It is good to see that the Company or Manager has give small investors (those apply 1 to 99,000 shares) a higher balloting ratio than those who applied for 100,000 shares or more. Please keep it up!

The placement tranche also see Heliconia (a Temasek related company) increasing its stake as well as fund manager (ICH) and prominent investor (Jeremy Lee) participating in this IPO.

I would expect this IPO to debut very well tomorrow! Huat ah! Congrats to those who managed to get the shares from the ATM!

Friday, 2 June 2017

Sanli Environmental IPO polls

I have previously used Survey Monkey to poll for Sanli. Even though more than 450 readers responded, they will only allow me to view the first 100 respondents.

I have decided to try a new "free" poll below. Please "vote" again so that i know if it is effective. ^_^

Are you applying for Sanli Environmental IPO?

Yes! It's a 3 chilli for me!0%
Depends, I am not really environmental friendly0%
No! Sanli sounds too close to "ass" chip0%

Thursday, 1 June 2017

Sanli Environmental Limited

Sanli Environmental Limited ("Sanli" or the "Company") is offering 52m new shares at $0.225 per share for its IPO, of which 49.5m will be via placement and the remaining 2.5m for the public. The Company will be listed on the Catalist with a market cap of around $60.4 million. The offer will close on 6 June at 12pm and starts trading on 8 June 2017.

Principal Business

The Company is an environmental engineering company in the field of water and waste management.  Water management refers to the treatment of raw and used water and Waste Management refers to the treatment of refuse in incineration plants.

The business can be divided into two main segments:
  1. Engineering, Procurement and Construction ("EPC") - services include upgrading of existing water treatment plants, upgrading of pumping station capacities and replacement of aged equipment 
  2. Operations and Maintenance - maintenance services to ensure reliability and minimal disruptions to customers' operations
The contracts for the business are usually between one to three years in duration. 

Financial Highlights

The revenue of the company has been growing impressively at a CAGR of 71% over the last 3 years from $19.4m in FY2014 to $57.2m in FY2016. The net profit grew to $5.9m in FY2016. 

Based on the pro forma net EPS of 2.07 Singapore cents and the enlarged share capital of 268.6m shares, the historical PER is around 10.9x. The EPS of 9m 2017 is also showing an improvement over the same period last year by around 5%. 

Assuming EPS grow by 5%, the EPS for FY2017 will be around 1.05 x 2.07 = 2.17 Singapore cents.

Use of proceeds

The Company intends to use the proceeds to undertake bigger projects, to expand its business premises as well as pursue opportunities outside of Singapore, in the South East Asia region

What i like about the Company
  • Established management and track record. Sanli is in business for more than 10 years with an experienced team. Its business has been growing steadily over the last few years
  • Attractive and growing sector. The waste management sector is an attractive sector and with increased focus on environmental issues, such technical expertise is scalable beyond Singapore, especially in this region. Singapore's strategic objective to become self-sufficiency in water would also bode well for the Company
  • Integrated engineering solutions and services. The Company is able to provide a cost effective, "one stop" solution to customers. This will allow the business relationships to be more customised and less "commoditized"  
  • Presence of Heliconia as pre-ipo investor. Heliconia is an wholly-owned unit of Temasek but independently run. The investments made by Heliconia, such as Jumbo and Kimly, have done well post IPO. Hopefully, this track record will continue
  • Strong order book of S$105.8 million. More than 50% of the orders will be fulfilled in FY2018. This will provide some certainty to the profitability of the Sanli in the near term.
  • SAC Capital track record has been good so far. Even the recent Aoxin Q&M IPO by SAC is trading above market
  • Dividend policy of at least 20% of net profit. Assuming the EPS is 2.17, that will translate into a yield of around 2%

Some of my concerns
  • Overly reliant on PUB. While PUB will be a good customer, it is quite hard to imagine a company being so overly dependent on one single customer. This will be a key risk for me
  • Ability to scale business outside of Singapore. While the Singapore market is "stable", it will also be pretty limited. The ability to scale the business into ASEAN will be critical for the next phase
  • Small cap company
Peer Valuation

As you can see from the table above, the market actually pays a premium for water companies. They are trading at multiple ranging from 11x-22x. Assuming an EPS of 2.17 and a conservative PE range of 12-15x, the fair value of Sanli will be between 26 to 32 cents. A more aggressive PE range of 16 to 20x will mean a price between 34 to 43 cents.

Mr IPO chilli rating

I like the fact that Company is reserving some shares for the public and endeavor to pay 20% of profits as dividend. The track record of recent IPOs as well as that of SAC Capital also bode well for the debut. The presence of Heliconia adds an added layer of comfort (enjoy while it last). I understand the demand for the placement shares is pretty strong as well. Overall it, it is a 3 chill rating for me. Hoot ah! 

Please note that Mr. IPO is vested through the placement tranche and the chilli ratings are super duper biased.

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