LS 2 Holdings Limited ("LS" or the "Company") is offering 27.75m shares at Singapore 20 cents each via placement with no public offer. The placement tranche will end on 21 Feb 2022 at noon and starts trading on 24 Feb 9am. The market cap is around $37m.
Since there is no retail tranche, I am not going to do an in-depth analysis but share any broad areas that capture my interest when I go through the prospectus.
The Company is a home-grown service provider and provides a full suite of cleaning services such as conservancy services, facilities cleaning, housing keeping, pandemic disinfection services and F&B cleaning (see below).
Random Rumblings - whatever that captures my eye
I quite like the prospectus - The gatefold in the prospectus is quite young and energetic looking - no run of the mill pictures and gives a clean and modern look with clever use of icons and graphics to depict projects etc to tell the story. You can find the usual pictures in the main body of the prospectus.
Labour of a Father's Love ? It is already quite rare to find children who want to work for their dad. Econ Healthcare has a father-daughter team while at LS 2, you not only have one but two daughters (likely to be twins) working for their dad. While some of you may be concerned that it is a family run business (and rightly so), they are not paying the daughters (both aged 27) huge amounts of salary yet. The prospectus painstakingly points out that they will be getting between $50,000 to $100,000 per annum. Let's face it, not many young people will join their dad, not to mention the cleaning sectors and young talents do bring different perspectives or ways of doing things
You need cleaning services in a recession or not - This is a recession resilient business since Singaporeans are too used to having their maids clean up after them at home. The part that confuses me is the margin which they are getting, which seemed to jump pretty erratically over the last 2 years. I believe Covid has been kind to the Company as demand for cleaning services would have increased significantly to prevent the spread of Covid
I am surprised to see such volatility in the profitability where profits jumped from $988k to $7.33m in a year and then only to see it drop by 55% in 1H 2021. The jump in profitability is likely due to increase in demand for cleaning services because of covid? I am not sure if the demand is sustainable in an endemic situation.
Assuming the full year 2021 profits dropped by 55% from 2020, then the post placement EPS is likely to be 3.96 cents x 1.02 (1H 2021) divided by 2.26 (1H2020) = 1.787 cents. That translates into a forward PER of 11x for FY2021, which is fair.
Mr IPO Chilli Ratings
I have no chilli ratings since there is no public offering. It will probably get a zero or 1 chilli rating as scaling this business beyond Singapore and getting the right labour work force can be challenging in the long run.
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