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Saturday, 21 July 2018

DLF Holdings Limited

DLF Holdings Limited ("DLF" or the "Company") is offering 18.5m Placement Shares at Singapore 23 cents each for the IPO. There is no public tranche, hence i will not spend too much time and effort on it. The IPO will close on 23 July 2018 at 12pm. Based on the IPO price, the market cap is $27.9m

Principal Business

The Company is a Singapore-based mechanical & electrical ("M&E") engineering services and solutions provider. The core business is in the provision of project management services and turnkey contracting services. 

Financial Highlights

According to the prospectus, the Company has an order book of around $6.4m which will translate into revenues for the next 1 to 3 years.

The EPS based on the post placement shares is 2.77 cents. That translates into a historical PER of 8.3x. Assuming the service agreements are in place, that PER will increase from 8.3x to 10.3x. The NTA per share is 2.78 Singapore cents.

Competitive Strengths

According to the prospectus, the strengths are:
  • Ability to undertake Turnkey Contracting Services for the hospitality and commercial industry
  • Provide value engineering and ensure seamless integration of M&E systems
  • Established track record and reputation
  • Experienced and dedicated management team
  • Network of customers in hospitality industry

Post the listing, the Company continued to be tightly controlled by Manfred Fan and Wong Ming Kwong with a combined stake of 79.3%.

What i like about the Company

I like the fact that the Company is profitable and the revenue and profits are trending up. The Company made $3.3m last year, unlike some of the loss companies trying to list on Catalist. While the IPO sentiments are currently weak, the issuance size is really small, hence if the placement is controlled well, it should debut well given the small float. 

Some of my concerns

The Company is operating in a competitive landscape where there are many M&E companies in Singapore and the space can be highly competitive. I am not sure about the sustainability of earnings and it ihas not promised to pay out dividends anyway. The two founders made between $250,000 to $500,000 each year. The valuation at 10.3x PER is fair but not "value-for-money". 

Chilli Ratings

I would probably have given it a 1 chilli rating for debut and give it a miss as it is not a stock that i will hold for the longer term.

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