Saturday, 19 April 2014

PACC Offshore Services Holdings Ltd

PACC Offshore Services Holdings Ltd ("Posh") is offering 252,020,000 shares at S$1.15 each. The prospectus is here. The international offer will have 212 m shares and the public offering will be 40m shares. Separate from the offering, Cornerstone investors have subscribed for 85.605m shares. Depending on the demand, there is an over-allotment option of another 46.125m shares for price stabilization. The Company will have a market cap of around S$2.038 billion. The IPO will close on April 23 at 12pm and starts trading on April 25.

Principal Activities

Posh is the largest Asia-based international operator of offshore support vessels and one of the top 5 globally with 112  diversified OSVs with the breakdown shown below. It also has one of the youngest AHTS and PSV fleet, which means they are more fuel efficient and environmental friendly.

Financial Highlights

The table below shows the audited performances for the last 3 years. While it is impressive that even though revenue has stagnated, the margins has actually improved as shown by the increase in net profit over the same period. The question to ask is why have the revenue stagnated? Is it due to falling chartering rates? What is this Other Operating Income that has increased so substantially during this period? Is it sustainable?

Based on the total number of shares of 1.82b shares and assuming a forex of 1.25, the EPS for 31 Dec 2013 is around Singapore 5.04 cents. At the IPO price of $1.15, the historical PER is around 22.8x. This is really not cheap. According to the research report by BOS, the forward PER (using the IPO price of $1.15) is around 8.9x. Although this is possible looking at the CAGR  67.4%, i am frankly not sure as I am not privy to the assumptions used. The report is sourced from Singapore Stock Market News.

According to note 22 of the audited financial statements, the other operating income is as follows. Not exactly impressive or sustainable to me.

It is also interesting to note that the Company has obtained "charter-free" valuations for the vessel that it owned. This typically means that if the Company sells the vessels with an existing chartering contract, it will fetch a higher sale price. However, having said that, there is a big "goodwill" asset of US$295m sitting in the balance sheet which i don't like. Why am i paying for that "goodwill"? 

What I like about the Company
  • Large diversified fleets provide capability for value-added services and comprehensive solutions to clients.
  • Proven international track record in many countries and region globally. 
  • Strong links to the Kuok empire. The empire includes names like Kerry Properties Limited, Shangri-la Asia Ltd, SCMP Group, WIlmar International, PPB Group Berhad and Malaysian Bulk Carriers Berhad.
  • Established reputation with Oil & Gas players and have long standing relationships with Saipem, Hyundai Heavy Industries, SapuraClough Offshore.
  • Highly experienced and proven management team. CEO has more than 40 years of relevant experience. It is professionally run and has no family members sitting anywhere.

My Concerns
  • The Company has been on a huge expansion track. Any change in macro demand will result in over capacity and may cause a drop in the chartering rates
  • Stagnating revenue. The profit growth seemed to be due to "Other Operating Income" of asset sale and forex gain. Are they sustainable?
  • As a result of expanding, the Company will be constantly in need of cash and the growth has been largely financed by borrowings. This will probably mean that dividends may not be paid for the foreseeable future
  • Robert Kuok is a shrewd businessman. Like all true entrepreneurs, he will out to max out the value he can get from the IPO, which probably mean the Company is fairly or over valued.
  • The NAV per share (before accounting for goodwill) is around $0.81 versus the $1.15 paid by investors.
Future Growth Strategies

The Company intends to use the net proceeds from the IPO to pay down debt, expand fleet and for working capital. Some of the future growth strategies include:
  • Broadening fleet diversification 
  • Expand into deep water offshore accommodation
  • Expand into new geographical markets that has significant growth potential

Post the IPO, the number of shares will be 1,820,000,000. The Company continued to be tightly controlled where substantial shareholders Kuok Family will hold about 75.8% of the Company. 

Pacific Radiance

My gut feel is that this counter will trade like Pacific Radiance whereby you will need a longer time for it to trade towards its potential provided it can execute its strategies and continue to grow its EPS. My IPO write up for Pacific Radiance is here.

My Valuation

This set of peers is downloaded from Capital IQ based on last Friday's closing price

Since this company is a top 5 global company, it should technically deserve a premium over its peers. However for conservative and given the pricing being priced at the lower end of the book building, i will be more conservative and use the Pacific Radiance and Ezion forward PER of 10x as a benchmark.

If POSH trades towards the forward PER of 9x-10x, the fair value range should be around S$1.16 to S$1.29, representing an upside of between 1% to 12%. My gut feel is that the debut should be around $1.15 to $1.20 given the large IPO float.


Given the large float, muted sentiments and financial statements that i don't really like, i will give it a 1 Chilli rating as i think it is already fairly priced. How it will perform going forward will very much depend on whether the Company can execute its expansion plans and it is too early to pay the current price for that potential. 

Buy if you like but don't expect too much fireworks. Be contented if you get a 6%-8% upside on debut but any weakness in sentiments will probably mean a weak debut. 

Happy IPOing.

Sunday, 2 March 2014

What a drought!

Singapore is undergoing a dry spell with super hot and dry weather. It makes people feel lethargic and lazy. Even lazing around can be difficult unless I can hide in the air con room. 

I can definitely use the same analogy on our IPO market that is undergoing a super dry drought with nothing in the pipeline. I will probably die of hunger if I depend on this IPO market for articles and I will probably "die" a few times each year. 

In my work, i am engaged in multi million dollar project for the last few months that is absorbing whatever energy I have and burning my nights and weekends. I do hope it will draw to a successful end by end of march and I am counting down the days so that I can have more time to blog and invest again! 

The next IPO i heard is KOP Properties that will be launch in the coming weeks. Based on initial feedback, the demand is good.

Looking at the brighter side, the dry and hot weather has a great effect on bouganvilla and you can see them in full bloom along our expressways! Enjoy your ride and admire them at the same time. 

Here is a view along my favorite stretch of ECP. (Don't ask me how I took this picture)  :-P

Saturday, 1 February 2014

TalkMed Group

This post is for information only.

My apologies but I have totally missed this IPO as i was busy travelling for work and that it is a "placement-only" Catalist listing.

With the benefit of hindsight, it has really performed well on day 1, with price surging more than 400%! If only i can get into the "placement group" :-P

I want to introduce a Singapore Stock Market News blog to you today. I think the blog owner puts in a lot of effort to repost the news for the benefit of readers, so you should check it out if you need the local stock market news flow. It is relevant to investors who wants to keep track of news and reports affecting local companies!

In this regard, since i am not going to do my independent analysis on TalkMed, i am going to link you to the IPO facesheet from Singapore Stock Market News.

Happy reading. ^_^

Saturday, 25 January 2014

Balloting results - OUE Commercial REIT

OUE C REIT share offering was 2.75x subscribed. The over-allotment was also triggered, enabling the stabilising manager to support the share price should it fall below $0.80 on debut. 

The probability of getting the shares is about 50% for those who applied with the majority given to those who applied between 10 to 100 lots. 

Good luck to readers who applied and got it. If you have applied and still don't get this, then really you need to do something drastic to improve your chances liao. :-P such as the superman method. 

Happy weekend all!

Wednesday, 22 January 2014

Balloting Results - Kim Heng

The balloting results for Kim Heng is out.

Very difficult to get... so expect some fireworks tomorrow on this but i will be flying, so wouldn't be able to see the fireworks.

Interest shareholders in Havenport and OneEquity. 

Congrats to those whose lucky stars are shining.

I didn't get any.

Sunday, 19 January 2014

OUE Commercial REIT

OUE Commercial REIT ("OUE C-REIT") is launching its REIT at $0.80 per unit. The prospectus is here. The offer will end on 23 Jan 2014 at 12pm. 

There will be 208m units for the IPO of which 151.75m Units will be for Placement and 56.25m shares for the public.The market cap will be $1.39 billion based on the IPO price.

Initial Portfolio

The initial portfolio will consist of OUE Bayfront Property in Singapore and Lippo Plaza Property in Shanghai.

OUE Bayfront and OUE Tower comes with a 99 year leasehold starting from 2007 but Lippo Plaza Property has only a 50 years lease starting from 1994.

There will be 3 properties of which OUE C-REIT will have the right of first refusal and they are:
  • One Raffles Place
  • OUE Downtown 2 and Downtown Gallery
  • US Bank Tower

The Cornerstone investors are all from China. Founder of Summit Group as well as the husband and wife team Mr. Gordan Tang and Madam Chen Huidan from Singhaiyi.  OUE will continue to own 45.2% post IPO and the public will hold 28.8%.


This is after, another REIT. It is a yield play, so buy only if you like the assets and the yield of 6.8% for FY2014 and 6.89% for FY2015. Note that without the income support, the yield would have dropped to 5.56% and 5.75% respectively.

The distributions will be made on a sem-annual basis within 90 days from the months ending June and Dec.

Peer Valuation

This is the peer valuation table as of last Friday. You can see that from the peer valuation, without the income support, the yield is really one of the lowest among its peers. However, at 0.76x book value, it is one of the "better valued" REITs, even though OUE Ltd is trading at 0.73x Price to book!

What I Like about OUE C-REIT
  • A chance to own properties along the Marina bayfront below its "market valuations". According to the prospectus, the discount is around 23.9% based on the offering price. 
  • A strong sponsor (Lippo Group) with ROFR Properties
  • Some potential for rental improvements (but that effect is already off-set by the income support)
  • Spread out lease expiry

My Concerns
  • Income support again?! Seemed like a "feature" associated with OUE 
  • Given the high gearing of 42.3%, this counter will be impacted by the FED tapering and rising interest rate
  • Short lease life for the China properties.
  • The previous OUE HT is hovering around its IPO price.
My Ratings

I nearly fell asleep trying to analyze this counter. It is another REIT to me and not terribly exciting. I am personally not interested in this REIT but given that it is better valued than most of its peers, the downside is probably limited but don't expect too much fireworks either. I will give it a one chilli rating, buy only if you like the properties and is looking for yield in your portfolio but beware of rising borrowing costs should interest rate goes up!

Saturday, 18 January 2014

Kim Heng Offshore & Marine Holdings Limited

Kim Heng Offshore & Marine Holdings Limited ("Kim Heng" or the "Company") is offering 174m shares for the IPO at $0.25 each of which 160m are new shares and 14m are vendor shares. There will only be 3m shares for the public with the balance via placement.

The prospectus is here. The IPO will end on 20 Jan 2014 at 12pm and begin trading on 22 Jan 2014. The market cap post IPO will be around $177.5m. I have two "fact sheets" about the IPO, one from DBSV and one from Lim & Tan for your reference. 

Principal Business

Kim Heng has a long history and is an established integrated offshore and marine value chain services provider. The Company offers a one-stop solution for oil & gas projects with customers in more than 25 countries globally.

The Company specializes in offshore rig services and supply chain management as well as vessels sales.(See picture below if you need the details on the business the Company is engaged in).

Financial Highlights

The last 3 years figures have been fairly inconsistently with revenue fluctuating and net profit hovering around the 17-18m in the last 2 years. The first half performance also showed a slower pace versus the same period last year. The net profit declined by 24% from the same period last year. As i am not privy to the forward looking results, i can only make a guess.

According to the prospectus, the post invitation share cap is 710m shares and the adjusted EPS for 1H2013 is 1.1 cents. I will assume the full year EPS to be = 1.1 divide by 0.6 (since 1H seemed to be stronger than 2H for FY2012) = 1.8 Singapore cents. Based on the IPO price of 25 cents, the forward PE is around 13.8x.

However according to the fact sheet from Lim & Tan, the Company expects a more robust second half and recommend investors to 'subscribe' for the IPO. Assume a more robust second half, my EPS will be approximately = 1.1/0.4 = Singapore 2.75c and that translate into a forward PE of around 9x (which is reasonable).


Looking at the list of shareholders, Credence Capital Fund II is run by Tan Chow Boon, Koh Boon Hwee and Seow Kiat Wang and one of the investors of Credence Capital Fund II is Mr. T

Credence bought into the Company at an average price of 20c. As they invested only in 15 May 2013 and holds a 17.6% stake post IPO, they are still in the value creation mode.Given that it is supposed to generate private equity like returns, Credence's target price to exit will probably be above 40c with a 2-3 years time frame. 

What I like about the Company
  • Established brand name with more than 40 years track record
  • Oil & Gas sector exposure
  • Blue chip customers
  • Experienced management
  • Reputable institutional investors
My Fair Value

Assuming my more "robust" EPS of 2.75c is correct, i will give the IPO a fair value PE range of between 10-12x forward PE and that translate into a price of between 28c to 33c.

My Ratings

I am not privy to any 3 year plan of the Company but i believe Credence will not be there for the short term. As such, i will not give the 1H 2013 results too much weightage. Ms. Syndicate told me that this IPO is very hot and will have a +10c debut. I will tamper that expectation down a bit and say that i believe an opening above 30c is very likely even though the huge placement float of 174m can be a turn off unless they place the shares to institutions and strong hands. If you want to give this a punt, i will say just do it but make sure you apply at least 50-100 lots so that you will get around 3 to 5 lots. 

3 Chills for me this time and Happy IPOing 

Saturday, 11 January 2014

Eurosports Global Limited

Eurosports Global Limited ("Eurosports Global" or the "Company") is offering 80m shares of which 40m are new shares and 40m are vendor shares at 28c each. 78.5m shares will be available for public offer and 1.5m shares for the public. 

The offer will end on on 15 Jan 2014 at 12pm and starts trading on Catalist on 17 Jan 2014.The market cap will be around $74.2m.

The Company was started by the Goh brothers and they specializes in the distribution of ultra-luxury automobiles. The brands they carry are primarily Lamborghini since 2001 and Alfa Romeo since 2004. 2 new automotive brands were added in 2012 and i have to say I am not familiar with those brands since i am not in that league. haha and even if i am in that league, i would probably not buy a Lamborghini.

Financial Highlights

The revenue for last FY declined from $113m to $86m and net profit dropped from $7.6m to $6.7m. The NAV of the company is around 7.35c versus the 28c paid by investors.

Based on the earnings of $6.7m, assuming service agreement was in place and based on enlarged share cap of 265m shares, the EPS will be around 2.18 cents and that translate into a historical PER of 12.8x.

Q1 FY 14 continue to show a decline in revenue and net profit over the same period last year and i am not privy to the current financial performance.


Post the IPO, Melvin will own 41.9% and Andy 27.9% with the balance of 30.2% held by the public. Effectively, no outsiders can take over the company as the majority ownership is still held by the brothers.

Special Dividend

The Company intends to sell and lease back its Teban Garden showrooms and pay a dividend of between $6m to $8m. I am not sure if that is a good move as it will subject the company to market rates and the majority of the payout will go back to the founders anyway. A $6m payout will translate into a yield of around 8% based on the IPO price but there is no formal dividend policy thereafter.

What I like about the Company
  • Allow Lamborghini fans to have a chance to own a small piece of the action :-P
  • Small float means easy to place out to the towkays who buy the cars from them. Each car probably cost more than $1m and I am sure they know many towkays in Singapore who can help support the stock.
My Concerns
  • Company is highly dependent on the distributorship from Lamborghini. The manufacturer is able to terminate the agreement at anytime with a 12 months notice period. 
  • Car industry is a competitive one. The other competitors in the ultra luxury market will probably be Ferrari, Bentley, Maclaren, Aston Martin and to a lesser extent Maserati and Porsche. 
  • Limited growth prospects unless they can acquire other brands.
My ratings

There are no similar peers that i can think of locally except TCIL (Tan Chong International). TCIL is trading at good value of around 6x PE, a discount to book value and a yield of 3% but they are targeting different consumer segments. Investors should seriously do their homework if they want to buy Eurosports for the long term and compare it with TCIL while punters don't really care since 28c is a nice number. My view is that if they do the placement well, the company should open above 30c and it is supported by a special dividend. However, i will give it a miss since i don't really like the car's design, limited growth prospect and declining profit trend. I will give it a 1 chilli rating - buy only if you like Lamborghini cars.

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