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IPO Chilli Ratings

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The Assembly Place - Balloting Results

This is probably one of the most usual press releases that went alongside the SGX announcement of the balloting results. The Company released a full presentation deck , which is actually quite informative, with information of upcoming pipeline etc (probably the Company felt that it is safer to release this after the IPO closes and not before). The balloting table is as follows: The IPO has drawn strong interest from prominent institutional funds such as Avanda Investment Management (as investment manager for and on behalf of its fund(s)) and Lion Global Investors Limited (as investment manager for and on behalf of its clients), along with prominent investors, including Mr Han Seng Juan, Mr Rudolf Jurgen August Rolles and Mr Chong Soon Kong @ Chi Suim2 , underscoring strong confidence in TAP's investment proposition. Separate from the Invitation, cornerstone investors, namely Apricot Capital Pte. Ltd., Asdew Acquisitions Pte. Ltd., Cache Capital Pte. Ltd., ICH Synergrowth Fun...
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Alliance Healthcare Group Limited


This will be a quick report as I am traveling for work this week. I am not going to spend too much time given the small public offering. 

Alliance Healthcare Group Limited ("Alliance" or "AHG") is offering 32m shares at S$0.20 each for its IPO on Catalist - for which 31m shares will be through the placement tranche and the balance 1m through the public offer. The offer will close on 29 May at 12pm and starts trading on 31 May 2019 at 9am. The market cap based on 207.888m shares is around S$41.6m

Principal Business

The Company is in four key businesses and uses technology to provide a broad suite of healthcare services primarily in Singapore:
  • Managed Healthcare Solutions
  • GP Clinic services
  • Specialist Care services
  • Pharmaceutical Services
The Company owns 17 GP clinics across Singapore under the "My Family Clinic (16)" brand and "Lee Clinic (1)" name  and 5 specialist clinics.

Financial Highlights

Revenue for FY 2019 was S$33.8m with profits of S$3.1m. Using 3M2019 figures, it seems that 2019 revenue and profit will be down. In addition, it is quite "counter-intuitive" to see Specialist Care having the lowest profit margin versus GP clinic services. Probably it means that the docs are paid more as Specialist and wouldn't share their profits with the group vis-a-vis the more generalists. It is also more common to see the investment holding and admin and management services costs being "pro-rated' against the different business units rather than having a "negative" profit margin there. 

Valuation

According to the prospectus, the PER (assuming service agreement is in place) for FY2018 is around 12.1x. There will be 207,888,352 shares and at 20c per share, a market cap of $41.6m.

Dividend

The Company intends to pay at least 30% of its net profits after tax for FY2020 and FY2021 as dividends.

Peer Valuation (Source CapIQ)

 You can see that the valuation of peers is quite ridiculous at 22x PER for Talkmed.

Assuming it trades to 12-15x for Alliance, then the 'fair value' range will be 20 to 25 cents.

 My Chilli Ratings

For a short term flip, the tight number of shares, the low quantum of 20c and relatively cheaper valuation seemed to be catalyst for a good debut above 20c. However, the weak IPO and market sentiments will weigh down the counter. In any case, the public offering is pretty small at 1m. 

I will give it a 1.5 chilli rating for the short term flip and 1 chilli rating for the longer term fundamentals. I will not be participating in this IPO. 
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