New IPO Coverage - Tee Land Limited

From Company's Prospectus  

A. Business Description

Spin off from Tee International; a residential property developer. Tee Land is a corporate spin off from Tee International (listed on SGX, last traded at S$0.44). Tee Land  is a primarily residential property developer in Singapore. Their property development projects are pre-dominantly freehold in tenure and are targeted at middle-to-high income consumers who value exclusivity in good locations.

Expanding into commercial & industrial segment and looks to overseas expansion. Whilst they continue to specialize in residential property developments, they are expanding into commercial and industrial property development projects. Leveraging on our experience and expertise in property development in Singapore, we have also extended our geographical reach to Malaysia, Thailand and Vietnam.

B, Usage of Proceed

From Company's Prospectus  

C. Financial Highlights

Bumpy revenue similar to industry peers. Like any smaller sized property developer, Tee Land exhibited bumpy financial records, which is highly dependent on its projects launches. Thus in year whereby it launches more projects, it will generally generate a higher revenue.  

From Company's Prospectus  

NAV of 31.49 cent. The pro forma NAV per share is S$0.3149, this compares to the public IPO price of S$0.54. Thus as a retail investors, you are paying a Price to Book (P/B) of 1.71X, which I don't feel particularly excited as I know a lot of property developer are actually trading below there NAV.

Market capitalization of S$241.3m. Post the IPO, Tee Land will be a S$241.3m market cap company.

From Company's Prospectus  

Capital value of S$394.5m. The capital value of its project is at S$394.5m and I think most of its projects are pretty interesting, due to the market segment they target (mid-to high segment). As such, they can command a high premium for those projects. Below provide the project details:

From Company's Prospectus  

Negative operating cash flow due to land acquisitions. Tee Land has been exhibiting negative cash flow for the past 2 years due to its land acquisitions activities as it seek to undergo expansion. This might worries investors but to me, I think it is good as we can see that the company is acquiring land actively to grow its business. Equity investors love GROWTH!!

From Company's Prospectus  

Just to help investors understand a typical the cash collection schedule for a Singapore property developer,  you can refer to the picture below:

From Company's Prospectus  

Dividend policy set at no less than 50% of net income. Subject to a list of conditions set out in the prospectus, the Board intent to declare no less than 50% of the FY13 results. But do note that, event with subject high dividend payout, there is no guaranteed absolute amount you will get as like mentioned earlier, the earning is just to bumpy.

In addition, below set out its competitors as per outlined by its prospectus:

From Company's Prospectus  

D. Investment Highlights

Premium property developer with an established track record. As mentioned about, Tee Land's property projects are pre-dominantly free-hold in tenure and are targeted at mid-to high income segment who value exclusivity in good locations. Thus they are able to charge a premium against it. They have also established decent track record since the mid 2000s.

Expansion via JV, overseas and cross segments. Tee Land enters into JV to maintained relationships with an extensive and established network of partners. This allows them to leverage on the partners' experience, business connections, expertise and resources to capitalize on growth opportunity. In addition, it targets to expand its geographical reach and cross segments (commercial & industrial) also provides growth avenues.

Strong cornerstone investors. Prior to its listing, TEE Land had attracted notable investors including Koh Wee Meng, CEO of Fragrance Group, and 2G Capital co-founder Tommie Goh.

E. Investment Risk

Inherent industry risk. Property sector is always a cyclical industry. Thus one should invest them when they are cheap during the crisis period like 97 AFC (Asia Financial Crisis), early 2000 SARS or even during the 08 GFC (Great Financial Crisis).

However in current environment whereby the property prices is trading at a all time high; regulatory uncertainty and the potential fear of increasing interest rate, I'm definitely not a investor of the property developer as unless there is some compelling story to them. 

F. Technical Analysis - Looks Favourable

Small public issue size. The public issue is quite small vs the original holding on by Tee International and cornerstones. In addition, the reserve share vs placement share vs public offer is quite skewed. The small supply of issuance size might create a strong retail demand, giving a favourable effect to it.

Home Basis effect. This is a local company that people is familiar with and there might be some home basis effect. People might like and know this company and will buy it.

Stabilizing manager effect. Last but not least, this is a factor that I think is important. With a stabilizing manager effect, this stock should not perform too lousy as the stabilizing manager will come in to interfere if the stock 

G. Conclusion

Yet another pump and dump. After the solid performance of Soilbuild, I guess investors are definitely greedy hoping that it will signal a start of a solid IPO market. I do agree that the technical factor of the stocks looks exciting. HOWEVER, if you know me, I believe in investing and not speculating. As a long term business, I'm not excited over this company as:

(1) Dislike the industry, think we are trading at the top of the cycle

(2) Don't like the fact that the people are paying S$0.25 while I'm paying S$0.54 (see below)

(3) Tee International the parent is trading at S$0.44 vs this subsidiary company that is IPO-ing at S$0.54

(4) Not much compelling upside story (unless they can get very good traction on its domestic market and all of its expansion initiatives)

From Company's Prospectus  

Thus you can buy and hope the stock do well on the first day but I will not be a long term buyer for it.

E. Timetable

From Company's Prospectus