Sunday, 19 November 2017

IPO Talk (RES&S and Mindchamps)


Published on 20/11/2017: www.smartinvestorinc.com
IPO Talk (RES&S Holdings and Mindchamps)
Hong Kong is buzzing with activities in the IPO scene whereby out of the 4 IPOs, all were sizzling hot which have garnered returns of as much as 100 percent (Chinese Literature) on opening day. 3 were spinoffs from Tencent and with the fourth (Razor) having some Singaporean flavor.

Over here in Singapore, we will have 2 IPOs that are going to be launched. So are we going to have the same fantastic returns reflected in Hong Kong? Let’s take a deeper look.

The 2 IPOs that are coming to our shore are:
1) RES&S
2) MindChamps

Here are some short thoughts on these 2 upcoming IPOS:

RES&S

Subscription deadline: 12 pm on 20th November 2017
Subscription Price: 0.22

It is famous for their Ichiban Boshi chain of restaurants and they have up to 20 brands under their belt. They will be listing at a PE of around 13.7. I would compare them with Japan Food which is trading at a PE of around 17 and so there is a gap to be filled. On the whole, I think they have a good product offering as their main brand, Ichiban Boshi, seems to be always crowded. I would rank them after Sushi Teh in Singapore. They are currently mainly based in Singapore and there are expansion plans regionally to drive growth. Debt is much higher though as compared to their peers. Their cornerstone investor is a subsidiary of Temasek and they were also investors in Jumbo Group.

In a nutshell, I think it is worth subscribing as I like the brand and there are potential for growth expansion. If they were able to trade up to Japan Food valuation of around 17, we could potentially see upside to the tune of around 28 cents. As the subscription deadline is just a few hours away, you could subscribe through internet banking or go to the ATM to do so.

You could find more information from our research team report through the link below:


MindChamps

Subscription Deadline: 12pm on 22th November 2017
Subscription Price: 0.83

Frankly, the valuation kind of put me off with a PE of around 37 based on FY2016 earnings. As their HY 2017 earnings are halved of HY2016, the PE will be even higher if based on forward FY2017 earnings. A peer comparison could be G8 Holdings which is listed in Australia and they are trading at a PE of 20 and that is after a recent surge in the share price of around 18 percent. The cornerstone investors are mainly their partners in their business and SPH which owns around 26 percent of Mindchamps.

If you have looked at the newspaper articles on Mindcamps IPO, they have not mentioned their steep valuation as after all the articles are published by SPH. Also, the preschool education though is a necessity but they are targeting the higher end of the segment which is more of a want and competition is steep. They have a worldwide expansion plan which I think is great but the execution will be demanding.

In summary, given the steep valuation, I don’t think is worth subscribing as the upside is likely limited.

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