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Tuesday, 22 January 2019

Grand Venture Technology Limited - Balloting Results

Grand Venture Technology announced that its IPO garners "strong support" in its public release where the 42.918m shares was 1.3x subscribed. The public tranche of 800,000 shares received application for 12.528m shares (over 15x).

Mr Ricky Lee (李添南), Executive Chairman of GVT, said, "We are very encouraged by thepositive response from the investment community to our IPO. We see this as a vote ofconfidence to our prospects and growth plans. This will spur us on to execute our strategy andtake GVT to the next stage of growth".

 The balloting table is as follows:


Good luck to those who applied! 😃

Sunday, 20 January 2019

GVT Venture Technology Limited








GVT Venture Technology Limited ("GVT" or the "Company") is the first IPO to be offered in 2019. The offering details are as follows:

IPO price : $0.275 each
Placement shares:  42.118m shares
Public offer: 800,000 shares
IPO closing date: 21 Jan 2019, 12pm
Listing date: 23 Jan 2019, 9am
Market Cap: $64.4m

Principal Business

The Company was established in 2012 with a strong focus in providing manufacturing and services solutions to the semi-conductor, analytical life sciences and electronics industries. GVT has facilities in Singapore, Malaysia (Penang) and PRC (Suzhou) to some of the largest OEMs in these industries (this is somewhat similar to sub-contractor to the main contractor role).


Financial Highlights



As in most IPOs, the Company demonstrated strong sales trajectory and profitability but do note that this is not very representative as the Company started from a very low base. Regardless, it is good to see that the Company is actually profitable and the first half of 2018 continued to show good traction.


Assuming the EPS (fully diluted basis) is around 1.89 cents, based on the IPO price of 27.5 cents, it translate into a historical PER of around 14.5x. Assuming the Company continues with its growth trajectory which is evidenced by HY2018 over HY2017 of 40%, the full year profit is potentially, 1.64 cents x 1.40 = 2.296 Singapore cents. That translate into a forward PER of around 12x.

What I like about the Company

  • Seasoned management team  - The Company is founded and led by entrepreneur, Ricky Lee, who has successfully sold their businesses before (Norelco Centreline). Norelco is now part of UMS Holdings. This probably helped explained why the Company was about to turn in a profit in its 2nd year of operation
  •  Some shares for the public investors - Good to see that the Company continued to engage public investors by keeping 800,000 shares for them while the bulk has been placed out

Some of my concerns

  • Heavy reliance on 6 key customers - the 6 major customers accounted for >90% of the revenue. Hence the financial health of GVT is heavily dependent on the OEM who in turn is heavily dependent on their ultimate customers. The ultimate customers does not have any contractual obligation to GVT as it is with the OEM. The 6 major customers is listed below.

  • Cyclical industry sectors - The semi conductor business is highly cyclical (since close to 80% of the revenue is from this industry). At one time, our market was filled with the semi-conductor players such as Chartered Semiconductor, Stats Chipac and UTAC. Today they are no longer listed on SGX. The manufacturing sectors have been undergoing consolidation and GVT will continue to be subject to the cyclical nature unless they are able to diversify away from the semi conductor business
  • Pre-IPO investors with "below market standard" moratorium - The list of pre-IPO investors are mostly individuals and their lock up period of 3 and 9 months respectively is "below" market standard of 6 and 12 months. You wouldn't rely on these investors to stay too long once they have made sufficient returns
  • Rich IPO valuation - The IPO is probably above its fair value (some may say over-priced) at 12-14x PER. After the 2H correction in the market, many of the OEMs are trading at that mulitples while contract manufacturers are trading at attractive valuation of below 10 (see Peer Analysis below)
Peers analysis

I did not include the likes of Venture, AEM, Valutronics etc as the Company did not list them as competitors. The list of competitors in the prospectus are listed below and there are 3 SG listed companies:


Based on the peer analysis, you can see that JEP holdings is the odd one one but closest to GVT in terms of market cap. Frencken Group and UMS holdings have market cap in excess of $150m, with stable revenue and net income. In fact both of these companies pay dividend yield of 4% to 9%. (Mr. IPO is vested in UMS holdings).


Conclusion

This is the first IPO of the year and i really wished i can give it a better rating. The good thing is that sentiments are probably better now than a few weeks back. Unfortunately, the rich valuation does not quite stack up unless i get more aggressive on the second half performances of GVT (which i am not privy to the numbers)

Investors are better off paying current market price for Frencken or UMS Holdings as it offer a recurring yield and is more established than GVT Venture. They also doesn't have the potential overhang when pre-ipo investors cash out of GVT. It is a chopped-chilli rating for me.

Polling Time

  

Tuesday, 1 January 2019

Singapore IPOs Tikams for 2018

2018 is a year to be forgotten for IPOs on the Singapore Exchange. SGX "failed" to attract any significant listings and most of the listings are currently underwater as shown by the table below.

(Source: Shareinvestor.com)

Mr. IPO has been reporting his IPO tikams (performances) since 2012. You can search for the prior posts here.  How did he perform in 2018?

Contrary to even my own expectations, 2018 turned out to be the best year i ever had because of a few significant "bets".

Majority of the gains came in the first half of 2018 and significantly from the RTO of Memories Group, which i took a significant placement shares , so technically it is not an IPO but I have classified it in the IPO category. The top 3 gains are as follows:
  1. Memories Group $ 19,471
  2. Asian Healthcare $  8,371
  3. SLB Development $ 3,366
While i have fared well in the IPO tikams, my personal portfolio suffered a big loss when i wrote down Hyflux Perps to 10% of its par value. At this juncture, I am not even sure if i can recover the written down value and i will blog about them in a separate post on  my passive income pursuit.

I think 2019 will continue to be challenging for the Singapore IPO market with SGX struggling to attract companies to list here. The market should continue to stay volatile in the first half and beyond that, it will be challenging to predict how the markets will perform. 

That is all from me for now. I take the opportunity to wish all readers good health, happiness and a wonderful 2018!  

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