Pacific Radiance Ltd - Balloting Results

Balloting for Pacific Radiance has been announced. The shares were 2.2 times subscribed. According to its press release, the IPO was largely subscribed by institutional investors in the placement tranche of the offer.

Over at the public tranche, the shares were 44.8 times subscribed!!! Below is the release of the public tranche allocation: 

Source: SGX Website

The link to the balloting result is found at this web-link:

http://infopub.sgx.com/FileOpen/Pacific_Radiance_Ltd_Balloting_Announcement_121113.ashx?App=Announcement&FileID=263935

Hopefully this will be a flyer performance tomorrow. May the odds be with you~~

New IPO Coverage - Pacific Radiance Ltd

From Company's Prospectus

1. Business Description

Singapore-based offshore support services providers. Pacific Radiance is a fast expanding owner and operator of a young and diverse fleet of offshore vessels with a significant presence in Asia. It operates in 3 key segments:

(i) Offshore Support Services

(ii) Subsea Business

(iii) Complementary Business - Marine Equipment Business/Project Logistics Business

From Company's Prospectus

Diverse and modern fleet with decent utilization rates. Pacific Radiance currently wholly own and operate a total of 62 offshore vessels which are chartered out to various IOCs (International Oil Company) and NOCs (National Oil Company), international oil and gas contractors and international seismic companies. In addition, they have another fleet of 71 offshore vessels via its JV and Associated Companies.

The fleet of OSVs (exclude the 71 vessels owned through JV and Associated Companies) has an average age of approximately 3 years. Utilization rate has also improved steadily since FY2010.  

From Company's Prospectus

  

Full-value chain services within the E&P cycle.  Pacific Radiance caters to the different phases of oil and gas field project life cycle as detailed by the diagram below:

From Company's Prospectus

Exposure to cabotage-protect markets. The company's strategic partnerships with its foreign partners have allowed them to penetrate into key markets with high barriers to entry in the form of cabotage laws, such as Indonesia, Malaysia and South America.

Cabotage rules provide that vessels that flagged the respective country's flag are given priority ahead of vessels flagged elsewhere.

Diagram below detailed the historical milestones of the company:

From Company's Prospectus

2. Use of Proceeds

From Company's Prospectus

3. Financial Highlights

Offshore support services contributes the most revenue; with growing importance from subsea. Offshore support services contributes most of the revenue (FY10 - 95%, FY11 - 83%, FY12 - 84%, 1H13 - 67%). Subsea is starting to grow in importance as the company seeks to grow this segment. 

From Company's Prospectus

Asia represents a core market for Pacific Radiance. The company has successfully diversified its revenue on a geographical level since FY2010, however Asia continues to be a core market for Pacific Radiance accounting for 58% of the revenue in 1H13.

From Company's Prospectus

Decent growth achieved throughout the year. Pacific Radiance has achieved decent top line and bottom line growth throughout the years. (see diagram below) EPS has also been achieving steadily.

From Company's Prospectus

From Company's Prospectus

P/B  looks slightly expensive compared to peers but fair on forward P/E perspective. On a P/B basis, Pacific Radiance looks expensive compared to the other SGX-listed peers (with the exception of Ezion). Nevertheless, on a forward P/E terms it looks fair if they are able to continue to deliver its growth. 

4. Investment Highlights

Attractive industry. The era of "easy oil" is over and Southeast Asia' deepwater market will grow in importance going forward, OSV players that are equipped to handle harsher drilling condition will be in demand. In addition, oil prices is expected to stay at a healthy level and this will be positive for the oil sector as a whole.

Diverse and modern fleet. I like the fact that the average age of its fleet is approx 3 years, which is younger than the industry average. E&P players typically are willing to pay a premium for a younger fleet given that they are better equipped with the latest technology.

Access to cabotage protected markets. As mentioned, access to cabotage markets help boost the utilization and charter rates of locally flagged vessels and its associated companies, particularly in Indonesia.

Listing of associate company, PT Logindo. Once listed, the PT Logindo might provide a positive re-rating on the valuation of Pacific Radiance.

5. Investment weakness

Crude oil price. As usual, oil industry is cyclical and the volatility of oil price might impact the company.

Competitive market. The OSV market is competitive in nature, with bigger players having a stronger balance sheet posing a threat for the company.

Regulatory Risk. Cabotage ruling might change and it might impact the protected market for Pacific Radiance.

  

6. Technical Analysis

Out of the 171.8 million of shares placed, only 5 million of share is by way of public offer making the free float to retail investors like us very little, the remaining are placed out as placement tranche.

I have a feeling that the technical demand for this issue might be strong.

7. Conclusion

I like the sector and I like the story of the company.

Valuation wise it is fair to me and given my favourable outlook for the sector, I will give it a BUY call for the IPO. (especially given the decent performance of Rex and KrisEnergy)

8. Timetable

From Company's Prospectus

Viva Industrial Trust (VIT)

From Company's Prospectus

1. Business Description

Stapled group comprising of VI-REIT and VI-BT. VIT is a stapled group comprising VI-Reit and VI-BT.

VI-Reit : Singapore based REIT established with the principal investment strategy of investing in portfolio of income producing real estate which is used predominantly for business park and other industrial purposes in Singapore and elsewhere in the APAC region.

VI-BT : At the listing date, VI-BT, a Singapore based business trust, will be dormant. It will, however, become active on some triggering events.

From Company's Prospectus

HLG & KSH are Sponsors of VIT. Ho Lee Group Pte Ltd (HLG) and Kim Seng Holdings Pte Limited (KSH) are the Sponsors of VIT.

UE BizHub East

Brand new property comprising of Business Park component & Hotel component. Located in the Changi Business Park, UE BizHub East is a brand new integrated mixed-use business park development comprising:

Business Park Component – 2 business park buildings with retail space

Hotel Component – A business hotel managed by Park Avenue Hotels & Suites under the “Park Avenue” brand, which features a gym, swimming pool and convention centre with a theatre seating for up to 600 guests.

Rental agreement for UE Bizhub East. UE Bizhub East is under a rental agreement whereby:

Business Park component - VIT will receive S$23.35m per annum at Listing Date, with a step-up by 5% in each of the 3^rd and 5^th year of the term. (30Apr13 – 64.2% occupancy)

Hotel component (retail) - VIT will receive S$0.65m per annum at Listing Date, with a step-up by 5% in each of the 3^rd and 5^th year of the term. (30Apr13 – 100% occupancy)

Hotel component (exclude retail) – Leased to UED for a fixed rental income of S$8.55m per annum renewable at S$9.66m from the 6^th to 10^th of the Hotel Lease.

Mauser Singapore

Ramp-up logistics facility. Located near Tuas Checkpoint and Jurong Port, Mauser Singapore is a ramp-up logistics facility that provides operational and cost advantages in attracting tenants compared to conventional “cargo-lift” logistics facilities.

Mauser Singapore is under the Master Lease at S$1.8m per annum with a 5% rental escalation in the 3^rd and 5^th year built into its lease term.

Technopark@Chai Chee

Business Park located in a mature housing estate. Technopark@Chai Chee is well-maintained and offers attractive building specifications such as large floor plates which offers flexible layout and allows optimal spatial planning and easy configuration of workflow operations by tenants. The property also offers F&B establishments and other lifestyle amenities such as tennis courts and a gymnasium and is well served by amenities located in the mature housing estates in the vicinity.

Rental support agreement for Technopark@Chai Chee. The rental support agreement (RSA) states that if the gross rental income of the property is less than the target rental income of S$2.15m per month, VIT may within the period of 2 years claim the difference in each month. The aggregate liability/claim shall not exceed S$2.3m. The rental for July 13 was S$2.0m and actual occupancy rent is 60.7%. With the RSA, the calculated occupancy is at an average of 87.5%. (Suntec – 85%, JLL – 90%)

Visible acquisition pipeline through Right of First Refusal (ROFR) Properties. VIT has a visible acquisition pipeline through the listed ROFR Properties (see table beside).

From Company's Prospectus

2. Financial Highlights

Pro Forma Balance Sheet

Projected Income Statement

Projected Yield

Peer Comparison

3. Investment Highlights

Strategically located in business parks and established industrial clusters in Singapore with close proximity to MRT stations & major transportation networks. VIT’s properties are strategically located in key business parks and industrial clusters in Singapore with easy access to expressways and MRT stations. The properties are therefore supported by excellent infrastructure and transportation networks that enhance their attractiveness to existing and potential tenants.

From Company's Prospectus

Long weighted average underlying land lease and relatively new properties. The weighted unexpired lease term for underlying land for the portfolio is approximately 45 years. Both Mauser Singapore and UE BizHub East are new properties, TOP in year 2012. As such, this will result in minimum maintenance capex for these 2 properties.

Potential upside given its low tenancy rate at Technopark@Chai Chee. The current tenancy rate at Technopark@Chai Chee stands at a low 60.7%, thus there is a upside potential for them to manage up the tenancy rate.

4. Investment Risk

TOO MUCH FINANCIAL ENGINEERING! Too much financial engineering is involved and the yield is optically higher due to the rental support mechanism.

5. Conclusion

To be honest, I really don't like VIT at its IPO price of S$0.78 as I think that (1) its valuation is fair to expensive & (2) suspected asset quality given low tenancy rate, artificially supported by rental support mechanism.

Idol Series - Peter Lynch

The opening statement from the video says it all:

" You shouldn't be intimidated. Everyone can do well in the stock market.

You have the skill, you have the intelligence, it doesn't required any education.

All you have to have is patience, do a little research, you got it.

Don't worry about it, don't panic. You got it. "

Attached youtube video is taken from Peter Lynch's "The Stock Shop". (you can purchase it via Amazon.com with this link: http://www.amazon.com/Stock-Shop-With-Peter-Lynch/dp/B004K7LMGK)

This 55min video provides a very good introduction on how one should approach an investment idea. The video is simple and straightforward.  

The fundamental behind it  is very similar to how I would analyze a company, as I believe it is always good to have a structural method on looking at an investment. But then again, it is a science looking at it but an art appreciating it.

Below is some of the key takeaway I gotten out from watching the video twice and I hope its useful for anyone who seek to be the next Warren Buffet or Peter Lynch!

Key Highlights

1) Be observant. Sometimes the best investment ideas is through your personal interaction and experience.

2) Give your investment time to grow. A good investment takes time to grow.

3) Remember that emotional strength is needed to withstand market volatility. The key organ here is not the brain but the stomach. You need to have the stomach for risk and ask yourself what would you do if the market goes down.

4) Invest in a company with a story. A simple story is a good investment. Sometimes too complicated one might not be the best investment because it's just too hard to understand.

5) Research with things you know. If you are an engineer, look at the devices you used and if it saves you time and money, it is probably a good stock!

6) You have to understand that markets goes down. It is the nature of the market.

7) Categorize company into 5 different categories:

a) Fast Grower - Most powerful. These companies have the right formula. It will usually take 5 to 10 years, or at times 30 years to reach its full potential. Thus there is a lot of time for you to put money into it. Wait till you see evidence.

           

b) Slow Grower - Slow growth is good if you pay a good price for it. Steady growth will result to steady dividend growth. Raising dividend is a good sign.

           

c) Cyclical - They usually make expensive big and long term item investment. Do not try to time it if you have no intimate market knowledge. Pick a good cyclical company with good cash flow and low debt.

           

d) Turnaround - It is at a very depress situation. You have to check its balance    sheet, make sure they have what it takes to tide through the next 12-24 month. Note you never buy on hope. Buying on hope is akin gambling. You can buy it when you see evidence that the timing is there.

e) Asset play - It is all about the hidden value of the asset.

8) Usually the smaller a company, the bigger the potential. Imagine, it will be easy to double your revenue from US$100 million to US$200 million than doubling it from US$10 billion to US$20 billion.

9) Usually a good company or story will involved:

- Strong growth

- Good research & development (R&D)

- Cost cutting

- New product

- Good brand name

- Good balance sheet

10) P/E is simply the number of year you take to earn back your investment assuming constant earning power. Rule of thumb, 3 to 5 years is a very good business.

11) Compared P/E with industry or historical. Remember you can't predict the future but you can learn from the past.

12) Again, you need to be confident about the story.

13) Good investment story only comes once or twice a year. Always balance your upside against downside. 

Soilbuild Reit - Balloting Results

The announcement for Soilbuild Reit balloting is out!!

Based on the 62,500,000 Units available to the public for subscription, the public offer was approximately 5.4X subscribed. This is considerably weaker compared to OUE H-Trust which garnered 19.1X over subscription.

If the first day performance of OUE H-Trust is any indication, Soilbuild Reit with a 5.4X over subscription might not perform well.

Nevertheless, we shall see how the trading works tomorrow. Below is the allocation for Soilbuild Reit:

Source: SGX Website

The link to the SGX website if you are interested:

http://infopub.sgx.com/FileOpen/Balloting_Announcement.ashx?App=Announcement&FileID=252698

New IPO Coverage - Soilbuild Business Space Reit (Soilbuild Reit)

From Company's Prospectus

1. Business Description

Industrial Reit, with a focus in business space properties. Soilbuild Reit is a Singapore real estate investment trust with an initial portfolio of quality business space properties located in Singapore. “Business space” refers to:

(i) all properties zoned as business park (which includes business space used primarily for office, including any ancillary usage, so long as such usage is permitted under the relevant regulation) and

(ii) industrial properties (including, but not limited to, ramp-up facilities, flatted factories and light industrial properties) which are used primarily for, among others, manufacturing, engineering, logistics, warehousing, electronics, marine, oil & gas, research and development and value-added knowledge based

activities.

Initial Portfolio includes 2 business parks properties & 5 industrial properties. Soilbuild REIT’s initial portfolio of properties comprises seven business space properties – two business park properties and five industrial properties. They include Solaris, an iconic business park development in one-north, Eightrium @ Changi Business Park, Tuas Connection, and West Park BizCentral.

From Company's Prospectus

Soilbuild Group is the Sponsor for the Reit. Soilbuild Group Holdings Ltd. is the Sponsor of Soilbuild REIT and will be the largest Unitholder holding a stake of 27.0% (assuming the Over-Allotment Option is not exercised). The Sponsor is a Singapore-based integrated property group with a long track record of experience in the construction and development of business park, industrial and residential real estate in Singapore. It recently listed its construction arm on the SGX.

From Company's Prospectus

High occupancy rate, with Master Lease Structure to guarantee rental stability. Soilbuild Reit has a high level of occupancy rate at 99.7%. In addition, 4 of its 7 properties are under Master Lease which provides rental stability. Below are the details of which property’s Master Lease Structure:

From Company's Prospectus

Right of First Refusal (ROFR) to 4 properties. Below are the 4 properties in which Soilbuild Reit has the ROFR.

From Company's Prospectus

2. Use of Proceeds

From Company's Prospectus

3. Financial Highlights

Offering price of S$0.78, represents 2.5% discount to NAV of S$0.80. At offering price of S$0.78, it represents a 2.5% discount to its NAV of S$0.80. 

Projected 7.5% & 7.7% distribution yield for FY13 & FY14 respectively. Based on the prospectus projection, FY13 & FY14 distribution yield is 7.5% & 7.7% respectively.

From Company's Prospectus

Valuation looks slightly cheap. By pricing it at a slight discount to the NAV, Soilbuild Reit looks slightly cheap. Comparing against its peers, Soilbuild Reit also provides a higher dividend yield.

As usual, below is the financial statements of the Reit:

From Company's Prospectus - Balance Sheet

From Company's Prospectus - Income Statement

From Company's Prospectus - Cash Flow

4. Investment Highlights

Young and modern properties with longest weighted average leasehold term for underlying land of 50.4 years compared to other industrial S-REITs. Soilbuild Reit has a young and modern properties with weighted average age of 3.4 years (by GFA). In addition, its portfolio has one of the longest average leasehold term for underlying land of 50.4 years compared to other industrial S-REITs.

Stable revenue stream from Master Leased Properties (49.1% of FY12 revenue) & upside potential from multi-tenanted properties. As mentioned above, the Master Leased Properties provides a stable revenue stream (49.1% of FY12 revenue) and the remaining multi-tenanted properties present a upside potential if there is a positive rental reversion.

From Company's Prospectus

Slightly cheap valuation. As mentioned above, valuation for Soilbuild Reit looks slightly cheap and there is some juice left in this IPO.

5. Investment Risk

Again, the dividend play is over. As mentioned in the previous Reit IPOs, the dividend play for S-REITs seems over.

Lack of upside catalyst. Investing in Reit nowadays has become more alpha selection rather than beta allocation. Although, Soilbuild Reit has a ROFR for another 4 properties, I struggle to see big upside potential as the Sponsor is not yet established enough.

6. Technical Analysis

In term of momentum, the IPO technical looks very strong. In addition, with the stellar first day performance of its Sponsor, Soilbuild Reits, I guess the demand might be good.

However, there seems to be a lot of existing Industrials Reits out in the secondary and I think fear a situation of oversupply.

Thus I’m giving this IPO a fair rating for its technical.

7. Conclusion

In a scale of 1 to 5, I will rate it at a 3.5 rating.

I like the valuation as there is still some juice left in this pricing but I’m not overly excited like Money Max, which I rate it at an “all-in” 5 rating.

Thus I guess players can put some money to work and do a pump-&-dump if it opens higher. But I doubt that it will be a flyer performance.

8. Timetable

From Company's Prospectus