Saturday, 25 April 2015

GCCP Resources Limited



GCCP Resources Limited ("GCCP" or the "Company") is placing out 122m shares at $0.23 each. GCCP is principally engaged in the quarrying and processing of limestone and according to the prospectus, the Company has one of the biggest GCC-grade calcium carbonate reserves in Malaysia. The IPO will close on 28 April at 12pm and starts trading on 30 April 9am. The market cap is $274.5m.

Quarries


The Company has two quarries of approximately ~26.3m tonnes of calcium carbonate reserves and according to the prospectus, the value of the quarries is in the range of between US$170m - US$580m.... with a preferred value of US$310m (seriously?)

What is Calcium Carbonate used for?


In case you are wondering, there are many uses for calcium carbonate, including my secondary school days lab experiment of blowing carbon dioxide into a calcium carbonate solution to turn it chalky. 


The consumption is expected to increase by between 3.5% to 4.1% per annum and the price outlook remained positive for the near term.

 
Financial Performance

Nothing to shout about as the Company continues to be loss-making and not operationally ready. I am not privy to 2015 forecasts.

What i like about the Company
  • Accounts is audited by a big 4, Ernst & Young.
  • Market cap is below the appraised value of the quarries.
  • Alan Wang is one of the pre-placement investors ~1.1% but his effective cost is only 11.2 cents versus public tranche of 23c! I would view it more positively if he is in at the IPO price.
My Concerns
  • Loss making company to the tune of MYR10.7m for 9M2014. Company is not operationally ready yet
  • Environmental unfriendly but essential resources play
  • Investors here are lukewarm to resources play looking at how CNMC goldmine traded
  • Not sure how true the appraised values are as i am not an expert in this
Mr IPO ratings

Since there is no public tranche and the company is not even operationally ready, i will give it a zero chilli rating. Buy only if you really like the "chalky lime water" experiment during your secondary school days or buy when the cloudy outlook of this Company turns clearer! 

Saturday, 4 April 2015

The unruly IPO drought...

This has to be one of the worst start ever to our local IPO market. There wasn't a single IPO since Keppel DC Reit on 12 Dec 2014!

I have been struggling to find things to write and finally there is something to write about when LHN Group launched its IPO on 1 April 2014. The write up on LHN Group is here but unfortunately, there is no public tranche.

During this time, my advertising revenue slowed down in tandem....... but thankfully i was approached by Unruly to do two sponsored videos for HSBC and Changi Airport Group. The sponsored videos are on the top right corner of the blogs. I inserted the videos in this post for your convenience.

You can help support this blog by watching the videos  ^_^ and you can  win a prize if you complete a survey for Changi Airport Group... happy watching.  I am not sure if you have read this article in Business Times, but Mr. Lee Kuan Yew is the father of Changi Airport too! 

Changi Airport Group



HSBC MindShare


LHN Group



LHN Limited ("the Company") is placing out 73,913,000 placement shares at $0.23 each with no public tranche for a listing on Catalist. The IPO will close on 9 April 12 pm and starts trading on 13 April. The market cap will be ~$83.2m. The Company is a real estate management services group with the expertise in optimizing space for its landlords and tenants. 


The Company currently manages 36 commercial, industrial and residential properties in Singapore and a commercial property in Indonesia and a resident property in Myanmar.

Business Plans and Future Plans
  1. Grow the property portfolio
  2. Acquire its own properties
  3. Expand its logistics services and facilities management businesses
  4. Get into new markets in ASEAN
  5. Develop its technological capability
Before and After

The Company is probably similar to a "fatting" centre where the net lettable area become "bigger" post transformation. The series of before and after photos copied here for your convenience.

Financial Results


The revenue and profit growth for the last 3 years looked quite impressive on paper. Using the most conservative EPS of 1.94 cents, the Company is listing at a historical PER of around 11.8x, but if i include the fair value gains of properties, the historical PER will be around 6.5x. The adjusted unaudited NTA per share is around 12.09 cents versus the IPO price of 23 cents.


Use of Proceeds

The use of proceeds is tabled below for your reference.


Dividend Policy

The Company intends to distribute dividends of at least 20% of its net profit after tax for FY2015, and FY2016. Assuming EPS remains at 3.53 cents, that will translate into a dividend of 0.706 cents or 3%.

What i like about the Company
  • A pretty interesting company that become the master lessee and then maximizing the potential of the properties. In a space constrained Singapore, this seemed to be a viable business.
  • Management team seemed to have established a good track record
  • Recurring and stable rental income
  • In the long run, once they have build up a sizeable portfolio of assets, it is possible to convert some of their properties into REIT to recycle the capital and earn management fees
  • Reasonable IPO valuation
Some of my concerns
  • Dependent on the health of the rental property market in Singapore
  • The landlords may not renew the lease with the Company or may increase the master rental after the properties have been optimized.
  • Heavily dependent on 3 suppliers (HDB, SLA and Transurban) but the share of revenue from these 3 suppliers has steadily declined from 72.6% in FY2012 to 58.2% in FY2014.
  • Family owned and fallout between the siblings who will own a combined 76.1% of the Company
  • I am actually not too concerned about the pre-IPO investors as their entry price is around 17.83 cents and they hold a small stake
My fair value and ratings

I actually quite like the Company but too bad there is no public tranche. Hence i will "punish" it with a one chilli rating. Assuming a fair value of 6-8x, using the historical financials, i will attribute a fair value of 21 to 28 cents. If the Company is able to deliver a 20% growth to its FY2015 results, the fair value will be around 25 to 34 cents. (Please note that I am not privy to the FY2015 results)

Happy watching from the sidelines. Mr IPO is not vested and is trying to see how he can lay hands onto the shares since this is the first IPO of 2015.... ^_^

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