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Mobilia Holdings Berhad

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Open to apply: 03/02/2021
Close to apply: 09/02/2021
Listing date: 23/01/2021

Share Capital
Market Cap: RM92mil
Total Shares:  400 mil shares (Public apply: 20mil, Company Insider/Miti/Private Placement/other: 80mil)

Industry (Net Profit %)
Homeriz: 15.18% 
Spring Art: 13.14%
Mobilia: 11.14%
Liihen: 9.51%

Business
Design & Manufacturing of home furniture.
Oversea: 73.39%
Malaysia: 26.61%
*2017-2020: 50.48%-56.48% revenue come from 5 major customer. 

Fundamental
1.Market: Ace Market
2.Price: RM0.23 (EPS:0.02)
3.P/E: PE11.50
4.ROE(Pro Forma III): 17.29%
5.ROE: 35.71%(2019), 27.55%(2018), 31.45%(2017)
6.Cash & fixed deposit after IPO: RM0.0406 per shares
7.NA after IPO: RM0.10
8.Total debt to current asset after IPO: 1.176 (Debt: 39.385mil, Non-Current Asset: 45.954mil, Current asset: 33.447mil)
9.Dividend policy: No fixed dividend policy.

Past Financial Performance (Revenue, EPS)
2020 (8mths): RM44.729 mil (EPS:0.0136)
2019: RM75.589 mil (EPS:0.0248)
2018: RM66.504 mil (EPS:0.0184 )
2017: RM55.730 mil (EPS:0.0184) 

Net Profit Margin

2020 (8mths): 10.31%
2019: 11.14%
2018: 9.39%
2017: 11.24%

After IPO Sharesholding
Quek Wee Seng: 74.56% (Exelient & Firstchrome)
Quek Wee Seong: 73.88% (Exelient & Firstchrome)

Directors Remuneration for FYE2021 (from gross profit 2019)
Datin Siah Li Mei: RM42k
Quek Wee Seng: RM577k
Quek Wee Seong: RM474k
Tajul Arifin: RM42k
Lim See Tow: RM42k
Total director remuneration: RM1.177 mil or 6.05%

Key Management Remuneration  for FYE2021 (from gross profit 2019)
Tan Ley Wun: RM150k-200k
Khoo Ai Lee: RM150k-200k
Ku Yong Yee: RM100k-150k
Wong Eng Chuan: RM200k-250k
Quek Yan Song: RM50k-100k
key management remuneration: RM0.65mil-0.9mil or 3.34-4.62%

Use of fund
Construction of building: 42.03%
Purchase of machineries: 9.42%
Repayment of borrowings: 13.77%
Working capital: 13.77%
Listing Expenses: 21.74%

Good thing is:
1. PE11.5 is acceptable fair value.
2. ROE above 15%.
3. Revneue continue increase over past 3 years.
4. Global work from home trend increase demand of furniture.

The bad things:
1. Top 5 major customer contribute over 50% of company revenue. 
2. Debt is high. 
3. Director & top management remuneration is over 10% from company gross profit. 
4. Use 13.77% IPO fund to pay debt, & listing expenses is 21.74% of total IPO fund (this 2 item is less help to contribute business growth in futures)

Conclusions (Blogger is not wrote any recommendation & suggestion. All is personal opinion)
The company choosen the right timing to IPO as global work from home increase demand of furniture, however Mobilia furniture is more focus on wood based furniture. The exstimated completion time for factory block B & C is 2022, we should see more revenue come in after 2 years time (unable to find out how many % increase in production capacity). Please refer below chart to understand the risk vs business growth forecast for the company within 3 years.

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*Valuation is only personal opinion & view. Perception & forecast will change if any new quarter result release. Reader take their own risk & should do own homework to follow up every quarter result to adjust forecast of fundamental value of the company.

HPP Holdings Berhad

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Open to apply: 15/12/2020
Close to apply: 07/01/2021
Listing date: 20/01/2021

Share Capital
Market Cap: RM139.8345mil
Total Shares:  388.43mil shares (Public apply: 19.4216mil, Company Insider/Miti/Private Placement/other: 89.2474mil)

Industry
Printing Industry CAGR 2016-2019: 6.04% 
Top Five Industry Player (by PAT Margin)
Kinta Press & Packaging S/B: 20.98%
GL Printing S/B: 18.99%
Thumbprints Utd S/B: 13.47%
Hin Press S/B: 9.10%
Hayan Group (HPP): 8.72%

Business
Printing & production of paper-based packaging. 
*Standard format machine utilisation rate 88.44%
*Currently 6 machines (5 in production line, 1 for training purpose)
*IPO add 2 machines (will dispose on old machines)
*Forecast printing capacity increase 20%
Revenue from Malaysia: 72.44%
Revenue from Oversea: 27.56%

Fundamental
1.Market: Ace Market
2.Price: RM0.36 (EPS:0.0212)
3.P/E: PE16.98
4.ROE(Pro Forma III): 8.885%
5.ROE: 12.72%(2020), 22.76%(2019), 28.82%(2018)
6.Cash & fixed deposit after IPO: RM0.0878 per shares
7.NA after IPO: RM0.25
8.Total debt to current asset after IPO: 0.4655 (Debt: 28.566mil, Non-Current Asset: 66.417mil, Current asset: 61.360mil)
9.Dividend policy: 20% Net profit dividend payout ratio policy.

Past Financial Performance (Revenue, EPS)
2020: RM101.203 mil (EPS: 0.0212)
2019: RM82.681 mil (EPS: 0.0343)
2018: RM64.395 mil (EPS: 0.0384)

Net Profit Margin
2020: 8.71%
2019: 16.53%
2018: 23.19%

After IPO Sharesholding
Aurora Meadow S/B: 51.72%
Kok Hon Seng: 5.94% (indirect 55.3%)
Lau Teee Tee @ Lau Kim Wah: 1.98% (indirect 53.51%)
Ng Soh Hoon: 3.58% (indirect: 57.66%)
Chong Fea Chin: 1.79% (indirect 53.7%)
Ang Poh Geok: 7.01%

Directors Remuneration for FYE2021 (from gross profit 2020)
Lau Tee Tee @ Lau Kim Wah: RM100k
Kok Hon Seng: RM0.954 mil
Ng Soh Hoon: RM0.216 mil
Philip Goh Teck Siang: RM60k
Choo Chee Beng: RM36k
Lee Chong Leng: RM36k
Total director remuneration: RM1.402 mil or 6.77%

Key Management Remuneration  for FYE2020 (from gross profit 2019)
Tan Kian Siong @ Chen Kian Siong: RM0.251mil-0.3 mil
Mah Chen Wah: RM0.151mil-0.2mil
Ng Soh Moy: RM0.151mil-0.2mil
Teng Tiang Chia: RM0.201mil-0.25mil
Lee Kuei Yong: RM0.051mil-0.1mil
Subramaniam A/L Mogan: RM0.101mil-0.15mil
Nur Syafiqah Binti Hassan: RM0-0.05mil
key management remuneration: RM0.906mil-1.25mil or 4.38%-6.04%

Use of fund
Capital expenditure and expansion: 40.82%
Repayment of bank borrowing: 24.38%
Working capital: 16.31%
Sales and marketing expenses: 6.27%
Listing Expenses: 12.22%

Good thing is:
1. PE 16.98 under acceptable range. 
2. Revenue increase over 3 years.
3. Major sharesholder hold by Aurora Meadow S/B, will have less large dispose of shares activities after IPO. 
4. After IPO forecast printing capicity increase 20%. 

The bad things:
1. ROE & EPS dropping over 3 years. 
2. 16.31% IPO fund allocate to pay back bank borrowing. 
3. Industry CAGC is not in high growth. 
4. HPP is not major market player among their competitors. 
5. Director & top management remuneration is over 10% of the company gross profit. 

Conclusions (Blogger is not wrote any recommendation & suggestion. All is personal opinion)
The IPO is at fair value.Estimated after completed install the new printing machine will have increase of printing capacity 20% that will increase revenue. However the business is not going to increase 100% in one or two years, as revenue also need to come with printing capacity. We might not see very high growth of business. (WARNING: business growth is not shares price growth)
for Risk vs business growth potential please refer below chart. 
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*Valuation is only personal opinion & view. Perception & forecast will change if any new quarter result release. Reader take their own risk & should do own homework to follow up every quarter result to adjust forecast of fundamental value of the company.

Mr D.I.Y Group (M) Berhad

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Open to apply: 06/10/2020
Close to apply: 14/10/2020
Listing date: 26/10/2020


Share Capital
Market Cap: RM294.95mil
Total Shares: 6.2766 mil shares (Public apply:125.532mil, Company Insider/Miti/Private Placement/other: 815.958mil)

Industry
Home Improvement Retail Sector.

Business
Hardware store.
Malaysia: 670 stores. (Penisular: 568, East Malaysia:102)
Brunei: 4 stores.

Fundamental
1.Market: Main Market
2.Price: RM1.60 (EPS:0.0506)
  -If retail IPO price lower than RM1.60, will refund the price difference.
3.P/E: PE31.6
4.ROE(Pro Forma III): 33.53
5.ROE: 54.19(2019), 58.79(2018), 60.14(2017)
6.Cash & fixed deposit after IPO: RM0.00807 per shares
7.NA after IPO: RM0.11
8.Total debt to current asset after IPO: 1.656 (Debt: 1.1203bil, Non-Current Asset: 1.1328bil, Current asset: 0.6767bil)
9.Dividend policy: 40% Net profit dividend payout ratio policy.

Past Financial Performance (Revenue, EPS)
2020 (6-mth): RM1.051bil (EPS: 0.0190)
2019: RM2.275bil (EPS: 0.0522)
2018: RM1.771bil (EPS: 0.0506)
2017: RM1.229bil (EPS: 0.0345)
***prospectures book EPS using Pre-IPO 6.088bil shares to calculate EPS, pg211)

Net Profit Margin
2020: 11.0%
2019: 14.0%
2018: 17.4%
2017: 17.1%

After IPO Sharesholding
1.Bee Family Limited: 50.6%
  - Tan Yu Yeh
  - Tan Yu Wei 
  - Yeh Family (PTC) LTD
  - WEI Futures Capital
2.Hyptis: 15.2%
  - Creador III L.P.
  - Creador II, LLC
3.Platinum Alphabet: 6.9% 
  - Gan Choon Leng
  - Tan Gaik Hoon

Directors Remuneration for FYE2020 (from gross profit 2019)
1.Dato' Azlam Shah Bin Alias: RM176k
2.Tan Yu Yah: RM1.187mil
3.Ong Chu Jin Adrian: RM1,271mil
4.Brahmal A/L Vasudevan: -
5.Ng Ing Peng: RM119k
6.Leng Choo Yin: RM111k
7.Tan Yu Wei: RM1.006mil
8.Soo Sze Yang: -
Total director remuneration from PBT: RM2.9646 mil or 0.308%

Key Management Remuneration  for FYE2020 (from gross profit 2019)
1.Lim Chen Hwee: RM550k-600k
2.Tan Yew Hock: RM400k-450k
3.Tan Yew Teik: RM350k-400k
4.Hoe Lye Peng: RM450k-500k
5.Lau Boon Teck: RM450k-500k
6.Chin Guangui: 450k-500k
key management remuneration from PBT: RM2.65mil-2.95mil or 0.306%

Use of fund
1.Repayment of bank borrowing: 91.6%
2.Listing Expenses: 8.4%

Good thing is:
1. ROE over 15.
2. Most large in number of hardware store in Malaysia (cost advantage) & Brands influence.
3. Past 3 year revenue increasing.
4. total Director & key management fee did not over gross profit 3%. 
5. Have fixed dividend payout policy.
 
The bad things:
1. PE31.6 is not cheap.
2. Net asset RM0.11
3. Net profit margin decreasing for pass 3 years.
4. 91.6% IPO fund use to pay back bank borrowing.
5. After IPO, still have RM1.12mil debt, but cash is RM50.623 mil. 

Conclusions (Blogger is not wrote any recommendation & suggestion. All is personal opinion)
This businees model successfully expand their business to almost whole Malaysia. But we cannot expect the business continue growth as past few years, as it already expand notion wide. 
In the prospectus book Pg13 mention they expected to add additional 100 store in 2020 & 100 store in 2021, however did not mention the expected area to expand.
The price PE31.6 is included & price in potential of futures expansion, trust this is not a fair price & there might have opportunities to buy open market when it adjusted into their fair value. 

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*Valuation is only personal opinion & view. Perception & forecast will change if any new quarter result release. Reader take their own risk & should do own homework to follow up every quarter result to adjust forecast of fundamental value of the company.

Econframe Berhad

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Open to apply: 05/10/2020
Close to apply: 12/10/2020
Listing date: 27/10/2020

Share Capital
Market Cap: RM91mil
Total Shares: 325mil shares (Public apply: 16.25mil, Company Insider/Miti/Private Placement/other: 81.25mil)

Industry
Building material (specific in door)
Competitor (PAT%, refer prospecture pg149)
1.Door frame (9company): losses-5.1%
2.Key fire resistance door (10company): losses-7.21%
3.Key Woonden door (16 company):losses-7.81% (only one competitor have 14.32%)
4.Key Metal door (2company): 3.07%-15.14%
5.Key ironmongery (11 company): losses-8.3%

Business
1.Design & manufacturing of metal door frame (Rev:47.5%).
2.Manufacturing of fire resistant door sets (Rev:33.2%).
3.Manufacturing of metal doors (Rev:0.6%)
4.Trading of wooden doors & inronmongery (Rev18.7%)

Fundamental
1.Market: Ace Market
2.Price: RM0.28 (EPS:0.025)
3.P/E: PE11.2
4.ROE(Pro Forma III): 18.58
5.ROE: 31.28(2019), 23.72(2018), 19.18(2017)
6.Cash & fixed deposit after IPO: RM0.068 per shares
7.NA after IPO: RM0.14
8.Total debt to current asset after IPO: 0.083 (Debt: 3.25mil, Non-Current Asset: 10.068mil, Current asset: 39.089mil)
9.Dividend policy: No fixed dividend policy.

Past Financial Performance (Revenue, EPS)
2020 (9-mth): RM29.977 mil (EPS: 0.0130)
2019: RM44.089 mil (EPS: 0.0250)
2018: RM39.834 mil (EPS: 0.0157)
2017: RM35.494 mil (EPS: 0.0096)

Net Profit Margin
2020: 14.0%
2019: 18.5%
2018: 12.8%
2017: 8.80%

After IPO Sharesholding
1.Lim Chin Horng: 34.7%
2.Khoo Soon Beng: 2.0%
3.Lim Saw Kee: 33.4%

Directors Remuneration for FYE2020 (from gross profit 2019)
1.Robert Koong Yin Leong: RM15k
2.Lim Chin Horng: RM222k
3.Khoo Soon Beng: RM133k
4.Lim Saw Kee: RM10k
5.Tan Hock Soon: RM15k
6.Ilham Fadilah Binti Sunhaji: RM12k
Total director remuneration from PBT: RM0.407mil or 2.79%

Key Management Remuneration  for FYE2020 (from gross profit 2019)
1.Yong Wai Kin: RM100k-150k
2.Lai Shu San: RM100k-150k
3.Yong Chaw Ang: RM100k-150k
4.Soi Wen Li: RM50k-100k
5.Ang Sze Cie: RM50k-100k
key management remuneration from PBT: RM0.4mil-0.65mil or 4.45%

Use of fund
1.Land acquisition and construction of new manufacturing facility: 27.5%
2.Automation of manufacturing process: 22.0%
3.Working capital: 34.1%
4.Listing Expenses: 16.4%

Good thing is:
1. PE11.12 is not too high & ROE is over 15.
2. Debt is healthy.
3. Director remuneration is acceptable.
4. Most of the IPO fund use to expand business.
5. The company planned to increase automation process in the production line.

The bad things:
1. Too many competitors in market. 
2. Most competitor PAT Margin making either losses or less than 8% PAT margin, buy why Ecoframe only make 18.45%, unless they very specific price/cost advantage in this industry.
3. No fixed dividend policy.
4. Current over supply property environment & covis-19 is not benefit the industry growht.

Conclusions (Blogger is not wrote any recommendation & suggestion. All is personal opinion)
The timing of property growth have very high related with their product demand. Hence, current property oversupply & covis-19 effect economic growth, will not benefit the company in coming 1-3years. 
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*Valuation is only personal opinion & view. Perception & forecast will change if any new quarter result release. Reader take their own risk & should do own homework to follow up every quarter result to adjust forecast of fundamental value of the company.

Aneka Jaringan Holding Berhad

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Open to apply: 01/10/2020
Close to apply: 09/10/2020
Listing date: 20/10/2020

Share Capital
Market Cap: RM177.5 mil
Total Shares: 538.1mil shares (Public apply: 26.906mil, Company Insider/Miti/Private Placement/other: 112.984mil)

Industry
Construction Industry
Competitor (Net Profit Margin%)
Econpile: 3.8%
Pintaras Jaya: 8.3%
Sunway Geotechnics: 3.0%
Ikhmas Jaya: Loss making

Business
Foundation and basement constructions. 

Fundamental
Market: Ace Market
Price: RM0.33 (EPS:0.0343)
P/E: PE9.62
ROE(Pro Forma III): 13.2 
ROE: 24.1(2019), 22.9(2018), 14.8(2017)
Cash & fixed deposit after IPO: RM0.0728 per shares
NA after IPO: RM0.24
Total debt to current asset after IPO: 0.577 (Debt: 82.852mil, Non-Current Asset: 73.811mil, Current asset: 143.559mil)
Dividend policy: No fixed dividend policy.

Past Financial Performance (Revenue, EPS)
2020 (9-mth): RM104.226 mil (EPS: 0.161)
2019: RM221.172 mil (EPS: 0.0343)
2018: RM266.872 mil (EPS: 0.0249)
2017: RM171.153 mil (EPS: 0.0118)

Net Profit Margin
2020: 8.85%
2019: 9.10%
2018: 5.55%
2017: 5.00%

After IPO Sharesholding
Dato'Ir.Tan Gim Foo:0.06%
Pang Tse Fui:18.50%
Chong Ngit Sooi:18.50%
Loke Kien Tuck:18.50%
Dato' Noraini binti Abdul Rahman:0.06%
Wee Kee Hong:0.06%

Directors Remuneration for FYE2021 (from gross profit 2019)
Dato'Ir.Tan Gim Foo:RM54k
Pang Tse Fui:RM434k
Chong Ngit Sooi:RM434k
Loke Kien Tuck:RM434k
Dato' Noraini binti Abdul Rahman:RM46k
Wee Kee Hong:RM49k
Total director remuneration from PBT: RM1.451mil or 3.71%

Key Management Remuneration  for FYE2021 (from gross profit 2019)
Ooi Chong Pin: RM300k-350k
Steven Koh: RM350k-400k
Tham Kai How: RM150k-300k
Tung Sin Thian: RM250k-300k
Ngoi Tong King: RM250k-300k
key management remuneration from PBT: RM1.3mil-1.65mil or 4.21%

Use of fund
Purchase of new rotary drilling rigs and crawler crane: 37.48%
Repayment bank borrowing: 52.56%
Listing Expenses: 9.96%

Good thing is:
1. PE is not too high & ROE have double digit.
2. Debt is not too high.

The bad things:
1. 52.56% IPO fund use to repayment of debt.
2. Industry competitor & Aneka net profit didn't more than 10%
3. No fixed dividend policy.
4. Key management & Director remuneration total almost 8% of the total gross profit. 

Conclusions (Blogger is not wrote any recommendation & suggestion. All is personal opinion)
52.56% use to pay company debt is totally not acceptable. Not attractive, and is not the good timing for investment in construction business. 

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*Valuation is only personal opinion & view. Perception & forecast will change if any new quarter result release. Reader take their own risk & should do own homework to follow up every quarter result to adjust forecast of fundamental value of the company.

The Fat Prophets Global Contrarian Fund


 Overview
If you’ve heard of one hedge fund manager from the last ten years there is a good chance it’s Michael Burry. The eccentric investor made millions on his bets against the housing market during the Global Financial Crisis and was immortalized in the book and later film The Big Short. What is less well remembered about Burry’s story is that before the housing market blew up countless panicked investors withdrew their money from his fund, worried by Burry gambling so much money betting against a housing market in the middle of a boom. While Burry still made millions from his bet, it was less than it could have been, and the stress and frustration of the whole process led to him deciding to close his hedge fund.

Burry’s story highlights a fundamental issue with hedge funds: investors in hedge funds can withdraw their money whenever they like. It is often precisely when a hedge fund manager sees the most opportunity, for instance when the market is falling or in Burry’s case when a bubble is about to burst, that investors want their money back.

It is for this reason amongst others that Listed Investment Companies (LICs) have gained in popularity in Australia over the last decade or so. LICs are basically a hedge fund or managed portfolio that is publicly traded on the ASX. Unlike a hedge fund though, when investors decide to they want their money back from an LIC they simply sell their shares, which doesn’t reduce the money available to the manager of the LIC. This means that LIC managers are less beholden to their investors, and, the theory goes, therefore more able to concentrate on maximising returns.

The Fat Prophets Global Contrarian fund is the latest such LIC to list on the ASX, with their 33 million dollar IPO at $1.10 a share expected to close on the 10th of March. Fat Prophets was started in the year 2000 by their founder Angus Geddes as a subscription based investment advice and funds management company. Investors who sign up to their service are given access to a daily newsletter, as well as reports on certain stocks with buy and sell recommendations. Since inception the organisation has grown to over 75 employees and 25,000 subscribers, and now provides stock picks for a range of different markets and sectors. The Fat Prophets Global Contrarian fund is the first time Fat Prophets has branched out into the LIC world, and it will be run by Angus Geddes and his team using the same contrarian investing principals that has made Fat Prophets a success.

Pros

The Fat Prophets track record
Fat Prophets impressive growth over the last 16 years has been largely due to a record of stock picks which would be the envy of most fund managers. Since their inception in 2000 until the end of 2016, the annual return of an investor who followed all their Australian equities stock tips would have been 18.49%, against an All Ordinaries return of only 7.96%. They have had similarly impressive success in their other sectors. On the Fat Prophets website all of their past stock tips from 2006 to 2016 are publicly available, and reading these you get a good sense of the company and how they have achieved this level of success.

Each stock tip is thoughtfully written, with impressive amounts of detail about each company and its market outlook.  If you want to gain an understanding of their investing rationale and style, have a look at their buy recommendation for Qantas shares in August 2014.
                                                                               
The post goes to painstaking lengths to break down Qantas’s market position, their recent challenges, and why the Fat Prophets team felt the struggling airline could turn things around. Not only did the recommendation prove to be spot on, with the share price more than doubling over the next twelve months, but they were even correct about how it happened. They correctly predicted that a decrease in flight volumes along with the cost savings of Alan Joyce’s restructures would help bring the company back into profitability. Of course, not all their recommendations ended up being as spectacular as this one, but in all their tips they display a similar level of knowledge, discipline and intelligence. The opportunity of being able to get in on the ground floor with a team like this as they embark on a new venture is definitely an appealing prospect.

Minimal Restrictions
Reading through the prospectus, one of the things that jumps out at you is the loose rein Angus Geddes has given himself. While most LICs typically restrict themselves to certain sectors, areas or assets types, the prospectus makes it clear that Angus Geddes and his team are going to invest in whatever they feel like. They reserve the right to trade in everything from equities to derivatives, debt products and foreign currencies, and to go from 100% cash holdings all the way to 250% leverage. While some might see this as a risk, to me this makes a lot of sense. If you believe that Geddes and his team are worth the roughly $400,000 annual fees plus bonuses they are charging to run the fund, it makes little sense to restrict them to a sector or investment type. With this level of freedom, Geddes can go after whatever he feels will give the most value, and there will be no excuses should the fund not perform.

Cons
Listing price
As a new entrant with a smaller Market Capitalisation than the established LICS, fees are inevitably higher than some of the more established listed investment companies. The Fat Prophets Global Contrarian Fund will charge 1.25% per annum of their net assets in fees. In addition, a quarterly bonus will be paid each time the portfolio ends a quarter on a historical high of 20% of the difference between the current portfolio value and the next highest historical portfolio value. By contrast, Argo and AFIC, two of the largest Australian Listed Investment Companies charge fees of under 0.2% of their net assets per annum. It should be pointed out though that both Argo and AFIC regularly underperform their benchmark indexes, so perhaps in the LIC world you get what you pay for.

Net Tangible Assets
After the costs of the offer are paid for, the Net Tangible Assets of the Fat Prophets Global Contrarian Fund based on a maximum subscription will be somewhere around $1.08 per share. Listed Investment Companies usually trade at a relatively small discount to the net value of their portfolio, as the market prices in the fees an LIC charge. This means we can assume the shares actual market value will be somewhere around $1.05 to $1.07 after listing, versus a purchase price of $1.10. While this is the same for every newly listed LIC, it does mean that any investor thinking of participating in this offering needs to be in it for the long haul, as there is a good chance the shares will likely trade at below listing price for at least the first couple of months.

Wildcard

Loyalty options
Every investor who participates in the Fat Prophets IPO is issued with a loyalty option for each share purchased. From 12 to 18 months after the listing date, shareholders will have the option to buy an extra share in Fat Prophets for $1.10 for each share they own, regardless of what the actual stock price is. These loyalty options are forfeited if an investor sells their shares in the first year and are not transferred to the new owner. Initially this seems like a great deal, as you can double your holding at the listing price if the fund performs well, however the fact that everyone participating in the IPO is issued with the same loyalty options negates most of the benefit. In fact, in a simplified world where the stock price equals the net assets and no one sells their shares in the first 12 months, the loyalty option provides no benefit at all.  
To understand this, imagine that based on these assumptions the shares are trading at $2.20 after 12 months. Initially you might say the loyalty options now give each shareholder a bonus of $1.10 per share, as they could buy shares for $1.10 then immediately sell them for $2.20. However, this overlooks the fact that every other investor would also be exercising their options, doubling the number of shares on offer. At the same time, the company assets would only increase by a third from the sale of the loyalty options, from $66 to $99 million. With $99 million of net assets and now 60 million shares on issue, the share price would now be $99,000,000/$60,000,000 = $1.65. This means that not only would shareholders only make 55 cents per loyalty option, their original shares would have also lost 55 cents in value at the same time, giving a net benefit of zero for the option.
Of course, the real world never plays out like the textbook. Some shares will inevitably change hands in the first 12 months, reducing the number of options available and therefore providing some value to those who still have their loyalty options. However, any investor thinking of participating in this offering should make sure they have the funds available to exercise their options after 12 months if the share price is trading above $1.10, as otherwise they risk seeing the value of their shares reduced by other investors cashing in their options without being able to benefit themselves.

Summary
If you are looking to for an IPO that is going to double your money in six months, this isn’t the one for you. Any gains here are likely to be in the long term. Nor is this an IPO in which to invest your life savings, as the freedom Geddes and his team have given themselves mean that the risks could be considerable. However, if you are looking for a good long term investment opportunity for a portion of your portfolio, investing in this IPO could make a lot of sense. The Fat Prophets team have proven they know what they are talking about when it comes to investing, and if they can get anywhere close to their previous success the fund will do very well.

Personally, Geddes track record is too good to pass up, and I will be making a small investment.
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