Sunday, 16 November 2014

Trans-Cab Holdings Ltd.

Trans-cab Holdings Ltd (or the "Company") is offering 168m shares comprising 65m Cornerstone shares, 94.2m Placement Shares and 8.8m Public Shares at $0.68 each. Out of the 168m shares, 153m will be new shares with the balance vendor shares. There will be an over-allotment option of 20m shares. The IPO will close on 18 Nov 2014 at 12pm and starts trading on 20 Nov 2014.

According to the prospectus, the Company is the second largest taxi operator in Singapore by Fleet Size. In case you have never see a TransCab before, this is how it looks like. A striking red brighter than what you normally see in Hong Kong but with the same sense of familiarity.

This is a simple business so i will not have to explain much. The Company is a taxi operator and acquire and rent out taxis to licensed taxi drivers. According to the prospectus, there are 4 investment highlights, namely:
  1. Favorable industry trends and outlook - 
  2. Ability to retain and attract taxi drivers
  3. Ability to capitalize on economies of scale from fleet renewal and expansion
  4. Experienced and Committed Key Management Team
In case you don't know, Trans-cab was owned by a Union Energy and was granted a taxi operation license only in 2003. The founder, Mr. Teo Kiang Ang, is a secondary school dropout and made a living delivering gas cylinders. His company, Union Energy Corporation, controls more than 30% of the bottled gas market in Singapore and has annual revenue of $130m. A rags to riches story! If you want to read his inspiring story, it can be found here.

Financial Highlights

The Company has shown an increasing trend of revenue and profitability growth for the last 3 years. Probably it has reached an inflection point where it makes sense for the founders to get it listed since the growth will start to "stagnate".  

Having said that, the HY2014 numbers continue to show growth of around 20%. Given the stability of this business, I will hazard a guess that the EPS for FY2014 will be between Singapore 6 cents (doubling of 1H2014 adjusted EPS) to 6.48 cents (growth of 20% of adjusted EPS from FY2013). Given that there are some listing expenses and profit sharing to be accounted for and for simplicity, i will use Singapore 6 cents for FY2014 and 6.5 cents (FY2013 adjusted EPS of 5.4 cents x 20% growth) for FY2015.  

Based on the forecast adjusted EPS of Singapore 6 cents, the forward PER is around 11.3x for FY2014 and 10.5x for FY2015.

Dividend Policy

The Company intends to distribute not less than 15% of it profit after tax for FY2014 and dividends of not less than 60% of its PAT for FY2015.

Based on 6.5 cents for FY2015, the forward looking yield is actually very decent at around 5.7% (which explains why the insurance-linked asset management companies linked to Prudential and Great Eastern are buying into this stock as it more than matches the liabilities of the insurance policies they have on hand).

What i like about the Company
  • While you may argue that the industry is competitive, it is actually a controlled and regulated industry. There are currently six operators in Singapore. The number of licenses to operate are likely to be limited to a few key players and unlikely to increase any more. As LTA is trying to raise the operating standard, I wouldn't be surprised to see some consolidation going on among the smaller taxi operators as you need economies of scale to operate a profitable business. 
  • Strong take up rate by Cornerstone investors of about 9.4% of the Company. My initial read of the list of cornerstones are more of the long-only investors (Great Eastern, Prudential) and less of the "subscribe and throw" hedge funds. Please do note that they are not subject to any lock up. The IPO has also been priced at the top end of its range due to strong demand
  • Well integrated verticals. The Company owns their own vehicle workshops, have lower diesel and CNG pump prices for its drivers and also invests in fuel efficient taxis. So far the trans cab taxis i took from the airport are the hybrid vehicles and they are usually very "green" vehicles that are fuel efficient.
  • Stable business and high visibility of recurring income. While there are many taxis plying the roads of Singapore, the income is highly predictable and recurring in nature. People will still use the taxis in good weather or bad and in good times and bad. With Singapore rated as the top Lonely Planet destination for 2015, the tourism industry will likely to continue booming and this bodes well for the sector. 
  • The existing owners' interest continue to be aligned with the new investors. They own about 72% of the Company and will likely continue to pay out high dividends.
Some of my concerns
  • Disrupting technology. I have shared with you my prior experience with Uber in United States. In Singapore, the "car sharing" concept has not been accepted by the authorities. Otherwise, it will affect the livelihood of the taxi operators and companies.  Instead of Uber, Grabtaxi is the more established player here. Here is an old article on why Grabtaxi is giving Comfort Delgro a run for its money. Grabtaxi is partly owned by Temasek. Trans-cab should learn how to embrace such taxi apps (instead of creating its own) and worked in partnership with them. However, if the industry is liberalised here to the extent it is in United States, the taxi operators will be in deep trouble.
  • Changing regulations. If LTA continues to come up with new and more difficult operating KPIs, the Company may have difficulty complying and this will impact its license. 
  • Limited scalability. While the Company intends to increase its fleet to 5,234 by end of FY2015 and tender for bus routes in future, Singapore is a small island and the number of taxis are highly limited. It is difficult to scale up the business in a meaningful way. Venturing into bus routes is an unproven business. 
  • Investors are paying a high 62.5% premium to NAV for depreciating car assets and taxi operating license in exchange for future earnings. I am actually fine with this but just included here in case you share the same concerns. 
  • The two CEOs are very well remunerated and will receive between $1.25m to $2.25m per year before performance bonus. Probably this is not unusual given that they could have kept all the earnings of the Company of it continues to be privately held. 
Fair Value

Comfort Delgro and SMRT are trading at much higher valuations. Given they are "giants", I will not use the same metrics on Trans Cab. However, relative to them, Transcab is more attractively priced although I wouldn't call it a value buy at 11x PE. 

Assuming a fair value of between 12-14x PE for FY2015, the fair value trading range will be 78c to 90c. 


I will give it a 3 Chilli ratings given its relative better value against its peers, strong cornerstone investors, high recurring income predictability, strong cashflow and good dividend yield. It may be a good hedge against rising transport costs for the longer term too. 

Hoot Ah! Happy cabbing. 

Please note that Mr. IPO is vested with 14 lots from placement and intent to apply for more at the Public Tranche. 

Sunday, 2 November 2014

Zico Holdings Inc.

Zico Holdings Inc is placing out 48m shares at $0.30 each for a listing on Catalist. Once again there is no public tranche....SGX are you doing something about this? The IPO will close on 7 Nov at 12pm and will be listed on 11 Nov at 9am.

The market cap is $80.1m based on the IPO price.

Principal business

In case you don't know, Zico is the short form for Zaid Ibrahim. The website is here. It is a very well known law firm in Malaysia with more than 25 years of history.I am surprised that it chose to list in Singapore instead of Malaysia.

It has cleverly restructured itself such that it is listing mainly the Trust and Corporate services, while the offering of legal services will be to the extent it is permitted to do so directly. Otherwise, it will offered by the ZICOlaw Network. The ZICO law network is not part of the listing.

Financial Highlights

The revenue has been growing rapidly for the last 3 years but it is still a lowly RM19m for FY2013. Given this is advisory business, the net margin is high and the profit for FY2013 was RM11.6m

According to the prospectus, Zico is listing at a historical PER of around 23x and will have a market cap of $80m.


I am lazy and will cut and paste both the prospects and future plans from the prospectus.

Future Plans

What i like about the Company
  • ZICO is a "heritage" firm from Malaysia. 
  • The Company has been paying dividends for the last 3 years.
Some of my key concerns

  • The Company paid its owners a huge dividend prior to its listing. See picture above.
  • Transfer pricing between ZICO Law Network and ZICO Holdings Inc. There is actually a lot of room to "maneuver" in this related parties transactions as they are all "professional services"
  • High valuation of 23x PER for FY2013
  • You have to continue to rely on the few "key" lawyers to be the rainmakers.
  • Malaysia continues to be the key market for the company.
  • It is very difficult to forecast the earning as the revenues are services rendered and may or may not be recurring in nature. The breakdown of the revenue is below.

Peer Valuation

One of the only closest peer will be Boardroom Limited. Boardroom has a bigger market cap around $100m and a better PE valuation of around 13.6x. Boardroom has a yield of around 5.4%. Boardroom has very low liquidity.

Mr IPO ratings

I will give it a one chilli rating. Buy only if you like this as liquidity will drve up over time. While the valuation is very high, i understand from sources that the placement was very well received by the friends of ZICO and the books were covered very quickly.

Happy IPOing. Hope there will be something for the public investors soon?

Saturday, 1 November 2014

MS Holdings Limited

MS Holdings Limited ("MSH" or the "Company") is offering 27m shares (comprising 20m new shares and 7m vendor shares) at $0.25 each for a listing on Catalist. The listing will end on 5 Nov 2014 and will start trading on 7 Nov 2014 at 9am. There is no public tranche.

The Company is a crane rental company based in Singapore and rent out its cranes on a daily or short term basis. The Company has a fleet of 25 mobile cranes and 5 lorry cranes.


This is a pretty straight forward business so i am not going to provide much analysis. The key concern i have will be whether there is an oversupply situation in Singapore and whether the construction boom is going to end soon. Below is a pictorial view of what the Company has to say regarding their prospects.

Selected Financial Information


Based on the enlarged share capital and unaudited pro-forma FY2014 EPS of Singapore 3.5 cents, the Company is listing at a Price Earnings Ratio of 7.1x

The post IPO NAV is around 24.4 cents, which is close to the IPO price of 25 cents.

The market cap is around $25.5m.

Peers valuation

Tat Hong is a giant with a market cap of $500m compared to MS Holdings' market cap of $25m. The key ratios for Tat Hong is enclosed below for your information. While Tat Hong has a higher PE ratio, it is actually trading at 0.8x book value, which is "better value" than MS Holdings.

Another peer that is smaller than Tat Hong will be Sin Heng Heavy Machinery. Sin Heng is trading at around 10x PE and 0.8x Price to Book.

Assuming a 8-9x PE for MS Holdings, the implied fair value range will be between 28c to 32c.
Assuming a 0.8x to 0.9x PB for MS Holdings, the implied fair value range will drop to between 20c to 22c

What i like about the Company
  • Stable business with good margins
  • Fair valuation
My Key Concerns
  • Company is highly leveraged. The assets are acquired using finance leases and bank borrowings
  • The business is not really scalable unless they move out of Singapore
  • The construction industry is cyclical and the boom is probably tapering off in Singapore
  • Low barrier to entry
  • Yap Family business. 

Since there is no public tranche, the chilli ratings don't really matter any more. For the records's sake, I will give it a zero chilli rating....zzz....zzz...investors who like to have exposure to this particular segment of the construction industry may consider Tat Hong who may be able to survive a downturn better than MS Holding.

Friday, 24 October 2014

Serrano Limited - Balloting Results

Serrano Limited announced its IPO results this evening.

The public tranche of 1.5m shares as 7.6x subscribed and all investors who applied for the shares will get some shares. I am not familiar with the names mentioned in the placement tranche.

My personal gut feel is that the results is actually not that bad and investors who applied for the shares should be able to "flip" the issue. My "line man" in UOB said there should be some "supporter" for this stock as long as the markets remain stable. 

Good luck to those who applied.

Happy IPOing.

Saturday, 18 October 2014

Serrano Limited

Serrano Limited ("Serrano" or the "Company") is offering 30m shares comprising 22.5m New Shares and 7.5m vendor shares at $0.23 each. 28.5m shares will be place out with about 1.5m shares for the public. The offer will end on 23 Oct 2014 at 12pm and will trade on 28 Oct 2014. The market cap of the Company is around S$34.5m shares. 

Principal Business

The Company is a leading interior fit-out solutions company in Singapore and South East Asia. If i can use a simple term, you can call it the "interior designer" for property development firm in fitting out the properties.

Some of the well known properties in Singapore which you may be familiar will be D' Leedon, The Interlace, Reflections at Keppel Bay. The list below is the on going projects for 2015.

As of the date of the prospectus, the order book stands at S$69.7m. 

Financial Highlights

The revenue has been increasing steadily with net profit jumping from $0.6m FY2011 to $3.2m in FY2013.

The EPS for FY2013 based on the enlarged share cap is around 1.70 cents and that translate into a PER of 13.5x.

What I like about the Company
  • A long list of on-going projects with some prestigious projects
  • Generating revenue from Myanmar, the last frontier in South East Asia
  • Share price of 23c is close to its NAV of 16.9c
Some of my concerns
  • Vendor selling some shares
  • Exposed to the cyclical property cycle
  • Small cap stock
  • A long list of pre-ipo investors, many whom i am not too familar with.
  • Declined profitability for half year 2014
  • Family run business with many family members in the firm.
  • Company is a cashflow negative company as it has to finance the projects with bank borrowings and then collect the cash from the main contractor
Mr IPO ratings

I am giving it a 0 Chilli rating for the following reasons:
  1. Company is fully valued at this juncture with likelihood of a decline in profits for FY2014 given that HY 2014 has been disappointing. Having said that, the revenue recognition can be pretty lumpy for such companies.
  2. Property cycle turning downwards in Singapore
  3. Highly geared company and negative cash flow 
  4. Vendors are selling at IPO price
  5. Market sentiments is weak
Happy IPOing.

ISEC Healthcare Ltd

ISEC Healthcare Ltd ("ISEC" or the "Company") is offering 70m placement shares at 28c each for a listing on Catalist. The IPO will close on 23 Oct and list on 28 Oct. There is no public tranche. The market cap based on the IPO price will be around $128.38m.

The Company is a medical eye care provider with ambulatory surgical centres in Malaysia and Singapore. Actually the term sheet is pretty comprehensive, you can access it here


ISEC will use the IPO proceeds mainly for expansion into the Asia Pac region.

Financial Highlights

The EPS for FY2013 after adjusting for the enlarged share capital and service agreement will be around Singapore 1.22 cents and that translate into a listing PER of around 22.9x, which is fairly valued.

Q1 2014 continued to show a strong growth over the prior quarter with profit reaching around 1.8m versus 1.27m against Q1 2013 (40% growth).

Assuming net profit for 2014 grow by on 25% (I am not privy to any forecast), the net profit will reach $7.08m. That translate into EPS of around Singapore 1.54c or 18x PE.

Dividend Policy

The Company intends to distribute at least 25% of its net profit attributable to shareholders as dividends. 

What I like about the business
  • Resilient healthcare sector with specialized services
  • Helmed by a team of experienced specialist doctors
  • Asset-light, strong cash flow model
  • Demographics of ageing population with increased demand and the means to pay for higher quality private health care
  • Strong alignment of interest with the management team and doctors who owns more than 60% of the Company and they are not cashing out at IPO. 
  • IPO shares are purely for new shareholders and the cash is going into the Company for expansion. In fact 84.7% of the shares will be under moratorium for 6 months! (page 58 of prospectus). 
  • Low free float of only 15%
  • 3 Independent directors are subscribing for 400,000 shares each
  • A decent dividend payout policy
Some of my concerns
  • A people business. You need a strong team of dedicated doctors to continue the growth
  • I would prefer a big 4 auditor
  • High listing valuation
  • Low liquidity post IPO
Talkmed Group

One of the director, Mr. Sitoh Yih Pin is also the director on Talkmed Group.

Talkmed Group IPO at 20c and rocketed to $1. The only difference is Talkmed was priced at a much better valuation back then but the share price still moved up strongly post IPO except that liquidity will dry up over time.

My ratings

To be honest with you, i quite like the Company despite the high valuation. The management probably consulted some Fengshui Master. It is priced at 28c, it will list on 28 Oct and the market cap is $128.38m. I will give it a 3 chilli rating purely for this :@P. This coupled with the low free float means that the company will be tightly controlled and should do well post listing despite the current market correction. 

I will give it a 2 Chilli rating because it doesn't have a public float and retail investors like us can only watch from the side.

Happy Salivating.

Saturday, 11 October 2014

Investment Seminar by bloggers

Click to sign up

It is heartening to see local financial bloggers coming together to organize an event. I was invited to speak at the seminar on IPOs but unfortunately, i am not prepared to appear in my ninja attire. Sorry my dear friends. ^_^

While i am not ready to be famous, the least i can do is help the organizer do a simple write up. The ticket costs $16 per person but and readers will get a 50% discount to cover the cost of organizing the event. The code is IPOFRIEND but you can probably get similar discount codes from other bloggers easily. haha

Please note that i do not know any of the bloggers personally and I am not earning any referral fees from this event and the organizer has promised this to be purely educational with no selling. The $16 is to cover the cost of organizing the event.

Hope you will enjoy the event and find it educational.

Friday, 3 October 2014

EMAS Offshore Limited - Balloting Results

EMAS Offshore Limited announced its balloting results today.

This is one of the "worst" application results i have seen whereby investors who applied for 1 to 39 lots are "fully alloted" and investors who applied more than 40 lots will be allotted some shares but it is "bao tiok" ~ 100% will get it. It is "bao tiok" and not "bao jiak". 

Do note that the shares can be fully arbitrage and that i had given it a zero chilli rating. The oslo price as of today remained at S$1.01 thereabouts. Be prepared for a rout on its listing next Wednesday...
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