China Kunda is a manufacturer of precision moulds and plastic injection parts. They have launched the IPO after postponed its initial plan.

It is interesting to see how the underwriter manage to market this IPO when nobody seems to have appetite for IPO. First trading day is on 9 October 2008.

Don't bother to read the prospectus. Avoid it at all cost!!

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I have a small problem reading the prospectus of Qian Feng Fabric Tech in my office space: A sexy bikini girl on the cover page!

By looking at the public offer size of just 1 million shares out 123 million shares, we know that the job of issue manager is a tough job in this bear market, definitely not as easy as 1, 2, 3 to sell 123 million of shares now.


Qian Feng Fabric Tech Limited is an integrated manufacturer of functional knitted fabrics, and to no surprise, from China again.

The offer price is 20 cents and the application will close on 25 August 2008. For information, the recently listed Zhongguo Pengjie Fabrics Limited is IPO at 23 cents and closed at 17 cents on 18 August 2008, down 6 cents. This IPO never closed above 23 cents since listing.

Can the Qian Feng Fabric Tech make a difference? I will scrutinize further.


Links:
Prospectus at MAS/OPERA

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Out of the last 30 IPO in SGX, there is only 5 counters trade above water now. They are:

CHINA FIBRETECH LTD (IPO price $0.21, Last Closed $0.245, Up 16.7%)
YONGMAO HOLDINGS LIMITED (IPO price $0.35, Last Traded $0.37, Up 5.7%)
WEE HUR HOLDINGS LTD. (IPO price $0.25, Last Traded $0.265, Up 6%)
OLD CHANG KEE LTD. (IPO price $0.20, Last Traded $0.24, Up 20%)
KTL GLOBAL LIMITED (IPO price $0.28, Last Traded $0.295, Up 5.4%)

One fact worth to note is that 2 out of 5 winners, Wee Hur and YongMao are construction related stock.

Now, we have another potential hero coming on board: HAI Leck Holdings


Hai Leck Holdings Limited is an integrated service provider of scaffolding, corrosion prevention and insulation works mainly for the oil & gas and petrochemical industries.

Hai Leck Holdings launches IPO at 26 cents a share with market capitalization of S$84.5 million. The net proceeds from the issue of the New Shares (after deducting estimated issue expenses) is approximately S$19.8 million.

This amount is insignificant if compare to the dividend distributed upon their Restructuring Exercise amounting to S$78,874,000 (among others dividend declared) in respect of FY2007.

The dividend is mainly come from the disposal of their stake in Hiap Seng Engineering Ltd. If this proceed is retained for expansion instead of distributed to their shareholders pocket, then there is no need for this IPO.

This company basically is debt free with stable stream of revenue and profit from their operation. What surprises me is the valuation of the company, even with relatively high NTA of 16.5 cents.

This is what we read from The Business Times 15 August 2008:
“At 26 cents a share, the offer is pegged at a price earnings ratio of 8.1, based on net earnings per share of 3.2 cents for the financial year ended June 30, 2007, and pre-IPO capital of 240 million ordinary shares.”

However, this is flaw.

When we pay 26 cents a share, we are actually paying for one share out of 325,000,000 shares post-invitation. Based on the same net earning and financial year, we are actually paying price earning ratio of 11.0 times!!

They have many competitors on Jurong Island and Bukom but none of them is public listed except CWT Limited with a small segment of corrosion protection activity. The more realistic comparison is with Rotary Engineering, OKP Holding Limited, Tat Hong and Tiong Woon, even though they do not do the exactly same trades.

I do not have convenient access to the financial data for all these companies. However, you may comfortably assume that they are not traded at double digit price earning ratio. An analyst report by CIMB on Yongnam Holdings Limited dated 15 August 2008 show that a basket of 5 construction stocks has simple average of 5.56 times FY08 and 4.6 times FY09. (Note: I think there is some error in calculating the simple average on the said report, my figure is re-calculated)

Noted also the small market capatalization.

I may have missed something but I am not buying anything appeared to have been priced exorbitant in this type of bear market. Disclaimer as usual. Please correct me if I’m wrong.


Important Date To Note:
26 August 2008, at 12.00 noon Close of Application List
27 August 2008 Balloting of applications
28 August 2008, at 9.00 a.m. Commence trading

The Invitation is for 85,000,000 New Shares at S$0.26
- 4,500,000 Offer Shares and
- 80,500,000 Placement Shares

The Company Website:
http://www.haileck.com/

The Prospectus at OPERA

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The idea for the Catalist sponsor to take shares in lieu of cash payment for their professional fees is not a potential conflict of interest, but a confirmed one.
How could a sponsor keep watch over a listed company when they are the shareholder of the same company?


Those company whose simply too small to afford the sponsorship fees and continuing fee shall think twice before taking public listing as an option.
It is laughable that some was quoted as suggesting to has another independent continuing sponsor to work with the prime sponsor. If an entity is so poor to afford a sponsor, how could they afford the second one?
The sponsorship system for Catalist, the Singapore Exchange's (SGX) platform for smaller firms may require a review to patch the loop holes.

Reference Post from Business Times

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This is a very interesting article about dilemma of China's apparel and textile Industry. I believe for those interested to invest in company like Li Heng, Hong Xing, China Sky and the newest on going IPO- Zhongguo Pengjie Fabrics shall have read this.

Full article: http://www.nextinsight.com.sg/content/view/495/1/

纺织服装行业正遭遇严峻考验，业内人士叹道：中国纺织服装业陷入了近十年来最艰难的困境。面临国内持续紧缩的货币政策、国际市场需求相对萎缩、出口退税政策调整、人民币升值明显加快、原材料价格持续上涨、劳动力成本不断上涨、节能减排力度越来越大等恶劣营运环境，目前国内4万多家规模以上（年销售收入500万以上）纺织服装企业，有2/3处在零利润状态；其余1/3略有盈利，平均净利润水平不会超过3％.

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Zhongguo Pengjie Fabrics Limited is a yarns and loom-state fabrics manufacturer serving the apparel and textile industry in China. Market capitalization upon listing base on issue price of 23 cents is $81.4 million. That is just a fraction of SGX listed upstream yarn markers Li Heng and China Sky with market capitalizations of around $1 billion. Others recently listed peer like China Taisan is about $185 million.

The net proceeds to be raised are approximately $18.1 million. Almost all the proceed is earmarked for expansion plan. With about $6 million dividend was paid out by their subsidiary, Dongying Pengjie in respect of FY2007, I am wondering why they do not keep the dividend for their expansion plan instead. Good to note that the issue expenses are approximately $2.3 million.

Pre-IPO Investors have been bring in to contribute $8 million with effective cash cost per share of 19.1 cents. These groups of investors will have their cool dollar locked in for 6 months for the advantage of 3.9 cents at starting points. I personally do not think that they have a good deal. I believe they may have committed when the market have higher valuation for new listing in mid 2007.

Price earning ratio based on the Issue Price 23 cents, the historical EPS for FY2007 and post-Invitation enlarged share capital of 353,800,000 Shares is 6.3 times. If based on pre-Invitation share capital of 265,000,000 Shares, the PER tis 4.7 times. The latter is always shown in the prospectus which I presume carry no meaning to investor as that figure simply does not represent a condition exist in the real world.

For those worry about vendor sells out, not to worry. The major shareholder will still retain 74.90% stake. Upon listing, this company generally remains as a family business with tight control by Liu’s family. The market will be trading with free flow of 25.1% share only in the coming 6 months. I am a little bit worry about the liquidity of this counter upon listing.

I will avoid this listing based on the following major factor:
1. High valuation of 6.3 times PER compare to China Sky 4.7 PER and Li Heng 4.6 times PER
2. Some what analyst will suddenly jump out and start to utter word about ever increasing raw material cost of cotton eating into their profit margin yada yada.
3. Recent listing of China Fibretech (up) and China Taisan (down) have mixed results.
4. Market capitalizations too small

However, there is one important fact to highlight here: the number of new shares is 88,800,000 or Fatt Fatt Fatt, a very auspicious number for Cantonese.


9:00 a.m. on 31 July 2008 Commencement of Invitation
12:00 noon on 7 August 2008 Close of Invitation
9:00 a.m. on 11 August 2008 Commence trading
88,800,000 New Shares
2,000,000 Offer Shares (2.25%)
86,800,000 Placement Shares (97.75%)

Company website: http://www.pengjie-group.com/
Prospectus @ MAS

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Zhongguo Pengjie Fabrics Limited is a yarns and loom-state fabrics manufacturer serving the apparel and textile industry in China. I am wondering what take it so long to clear the lodgment to registration process, which is more then 7 months (Lodgment Date: 21/12/07, Registration: 30/7/08).

SGX has pretty listings of China fabric manufacturers now. The review will be up very soon.

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This is not the best week for IPO.

Kencana Agri Limited is a producer of crude palm oil (“CPO”) and crude palm kernel oil (“CPKO”) in Indonesia. This is a relatively small company in comparison to Wilmar and First Resource with market capital of US$223.3 million only. The size of the land bank is 107,782 hectares but only quarter of it is planted. However, this land bank is sizeable compare with First Resources of 174,592 hectare and Wilmar of 573,401 hectares.

They intend to raise US$40.4 million from this IPO and to use 27.9% to repay the debt. The remaining proceeds are mainly for acquisition and to expand its plantation and palm oil milling capacity.

Based on the post invitation share capital of 998,044,720 shares, the price earnings ratio is 6.13 times (Instead of 798,044,720 shares pre-invitation with PER of 4.6 times as per prospectus). In last Friday closing price, First Resource is trading at S$0.985 PER 7.9 times and Wilmar S$4.10 PER 14.7 times. The valuation of Kencana seems reasonable with the prospect in place.

Sentiment towards palm oil counters has abruptly turned southwards as the price of the crude oil pulled back from the peak. Some analysts in the region have started to downgrade plantation industry. However, I believe that the correction is temporary and the oil price with eventually stabilize above US$100. This shall be sufficient to support the healthy and sustainable growth of the palm oil sector.

In conclusion, this is an IPO worth subscription. I am aware that the market sentiment is bad if not worst. However, the reasonable valuation and bright prospect for palm oil plantation sector provide a limited downside risk. Short term speculation of plantation stocks is expected.

More cool facts:
Commencement of Invitation: 9:00 a.m. on 18 July 2008
Close of Invitation: 12:00 noon on 23 July 2008
Commence trading: 9:00 a.m. on 25 July 2008
200,000,000 New Shares:
1,000,000 Offer Shares (0.5%)
199,000,000 Placement Shares (99.5%)
– 300 lots for DBS Vickers Securities Internet Placement

More relevant material:
Prospectus at MAS
CIMB-GK Securities on Wilmar on 18 July ‘08
DBS Vickers on Wilmar on 17 July ‘08


More News update:
( 21/7/08 ) The Edge reported on their publication for the week of July 21, 2008 that the dealers are saying there is no grey market and they themselves are questioning the timing of the IPO. Indeed, most believe that prices will open lower on debut. (Small note: The same publication has reported that the debuts is on ‘next Monday’, which is incorrect. The commencement date shall be on Friday, 25 July 2008 )

( 21/7/08 ) DJ MARKET TALK: Asian Palm Oil Fundamentals Still Bullish (excerpt from ccloh - Patience Market Zone)
Last week’s Massive sell down in Asian palm oil stocks occurred despite any real change in still bullish fundamentals, says Credit Suisse. “This is a reflection of investors unwinding a crowded trade, and the fact that the plantation stocks have been very resilient amidst a global equity sell down,” broker says in note. Adds, “but its bullish fundamentals have not changed. Our view is that palm oil stocks will outperform over a 12-month view because there is a real shortage of edible oils and palm oil is one of the few inflation hedges.”

(21/7/08 ) “with all the bearish sentiments affecting palm oil stocks, it will take a big effort to sustain the price above its IPO for the short term.” Another review from Singapore IPOS

(23/7/08 9:30am) The application is closing at 12:00 noon today. I will proceed as per my original plan. I have my strategic on hand which may not suitable to you. Think twice for subscription and this is not an IPO for weak heart. Caveat emptor!

(23/7/08 13:10pm) Reuters commodities http://www.reuters.com/finance/commodity?symbol=MY@PLK.1 RM3062 RM3027 now (dropped RM190 just today!)

(24/7/08 ) Balloting result is out now. Surprisingly, there is 41.2 times oversubscribed for public offer share. Seem like the bearish view in the CNA forum is over stated.

(25/7/08 4:00pm) Open at 29.5 cents below IPO price but swiftly above 30.5 cents. I have locked in the profit at 31.5 cents and 33.5 cent for the placement share. Left with some placement share and very little offer share to catch the potential oil rebound trend. Expect more upside but prefer to limit exposure.

(28/7/08 9:20am) Sold the last placement share of 50lots at 37 cents this morning. Good day!

(29/7/08 ) Migrated from ouripo.wordpress.com to settle down at Blogger

(29/7/08 3:43Pm) Current price of 35 cents translate into price earning ratio of about 7 times, about the same valuation with other smaller size caps. The valuation remain undemanding and I will keep the offering share for the time being. Please exercise caution when IPO fever is over.

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