iWOW Technology Limited ("iWOW" or the "Company") is placing out 26m shares at 25 Singapore cents each for a listing on Catalist. The offer will close on 12 April at noon. The market cap based on the IPO price is $62.6m
There is no public offer for this issuance. As usual, I will not cover in detail if there is no public tranche as I want to incentivise companies to allocate at least a small portion to retail investors.
The Sponsor and Issuer Manager is Evolve Capital and the underwrite and placement agent is Futu Singapore. Both are relatively new to the IPO scene here but it is good to see more players active in the marketplace.
Background
The technology company was established in 1999, specialising in integrated wireless IoT solutions as a service. iWOW has two business segments as presented below. One of their business is to "monitor ex-offenders and accused persons" while they are out on bail or have been released under a remission order. So if you visit some restaurants such as
Soon Huat Bah Kut Teh, you will see some waiters with electronic tags tied to their feet.
Competitive Strengths
Financial Highlights
The prospectus shows a super "strong growth" from FY2019 to FY2021 and that can be pretty misleading. As such, they are probably "asked" to highlight in bold and red wordings on the front page of the IPO that it is a major beneficiary of Covid whereby a significant portion of the revenue was generated from the TraceTogether tokens. I better reproduce it below for your reference.
The TraceTogether tokens probably have a good margin, as shown by the charged profits of $3.7m in FY2021. The order book for TraceTogether stands at $11.3m as of 8 March 2022, meaning that it will taper off should covid becomes endemic. Having said that, the prospectus indicates a $54.2m order book from Electronic Monitoring System (IoT as a service). Unfortunately I have no clue what the margins will be like for this business.
According to the prospectus, the 6M 2022 numbers still look pretty decent, this is likely due to the Trace Together tokens contract. My gut feel is FY2022 will likely see strong earnings as well. The challenge will be to find new revenue streams to replace the likely loss of revenue from TraceTogether contracts and that will be from the electronic monitoring systems.
Valuation
According to the prospectus, the PER is around 15.1x based on FY2021 pre placement shares. It will be 16.8x if we include the placement shares.
Dividends
The Company intends to distribute at least 20% of its net profit after tax in FY 2022 and FY2023 as dividends.
Chilli Ratings
As mentioned, no chilling rating is provided as there is no public offering. If you are keen to apply for the placement shares, one key question will be "what's next" after TraceTogether. The ability to secure contracts from the government is a good sign that it has cleared the "highest security" as a company. Investors should check the revenue stream from IoT as a service and evaluate how sustainable or recurring this revenue stream is. If it is a long term contract, then it is worth digging into it. If it is not recurring and more of a one-off nature, then the question is what's next after the contract expires.
Happy iWowing....
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