Saturday, 25 November 2017

IPO Talk (No Signboard Holdings)

Published on 25/11/2017: www.smartinvestorinc.com


Hot on the heels after the recent 2 successful IPOs (RES&S and Mindchamps), we have the listing of No Signboard Holdings next up for the coming week where they are going to be listed on November 30th (Thursday).

RES&S (IPO price- 0.22) have done very well (Opening at around 0.36) as they were trading closer to Jumbo Holdings valuation on opening as compared to our peer comparison of Japan Food. However, they ended the trading week at 0.295 which is closer to our fair valuation of 0.28.

As for Mindchamps, we were cautious due to their lofty valuation of around 35x PE based on their listing price of 0.83. They did manage to open at just 84 cents but I guess the market is really in an IPO frenzy. They closed the trading day at 92 cents which carried an 11 percent premium to their IPO price.

So let's take a look at No Signboard for the week ahead and here are my thoughts.

No SignBoard Holdings

Subscription Price: 0.28

Subscription Deadline: 28th November 2017 at 12 pm

No Signboard is listing at the higher end of their price guidance from 0.23-0.28. Given the listing price of 0.28, they are listing at a PE (Based on FY2016) of 18.4X. Given that Jumbo is trading at a PE of 24X, there seems to be some upside for this new player on board. However, I do not foresee a huge surge as I will explain later.

No Signboard is mainly in three business segments – restaurant, beer, and ready-meal. Their business is seeing falling revenue and profit from 2015 to 2016. However, things seem to be picking up based on 9m 2017 versus 9m 2016 figures but it might not be sustainable (Mainly due to an 'Other Income Entry' which is likely one-off). Their cash levels are depleting fast whereby at last count, it has around 50 k worth of cash versus 670k last year (Could have used it for its new non-core businesses). They carry minimal debt. Nonetheless, the IPO proceeds of 32 million will come in handy at this juncture.


They intend to use the proceeds for a new casual dining theme, beer business, ready-meal business, and general working capital. Thus, they are trying to grow based on their non-core businesses which are different from the track of Jumbo which is investing in their core business. There are no plans for overseas expansion for their restaurant business whereby they did try to venture into Jakarta and Macau in the past but were not successful.

Looking at the ready-meal business whereby I did see vending machines powered by No Signboard, it makes me wonder if it is a sustainable and profitable venture given that good food are generally readily available in Singapore. As for the beer business, it is definitely going to be a competitive arena.

I believe Jumbo is trading at a high valuation mainly due to the fact that they have a foothold in the China market which has the potential for consistent growth. As for No Signboard, their core business is on a downtrend, they are working on their other businesses to propel growth. At this juncture, I find that it would be challenging.

Given that they are listed at the higher end of their indicative range, it leaves little room for a good upside. If it trades to Jumbo valuation of 24X PE, it could trade as high as 0.36. However, based on my analysis, they should demand a lower valuation than Jumbo. Moreover, general valuation for F&B businesses is pretty steep at the moment.

In a nutshell, I feel they could likely trade at a premium to their IPO price on the opening bell. However, this is more of a short-term trade as their underlying business does not seems to be doing well. Therefore, it is not advisable to hold it for the long haul.

For those who would like to set up a trading account, kindly Register Here

Disclaimer:
The information contained in this publication is provided to you for general information only and is not intended to nor will it create/induce the creation of any binding legal relations. The information or opinions provided do not constitute investment advice, a recommendation, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person or group of persons acting on this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise.
You may wish to obtain advice from a financial adviser before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest.
Any views, opinions, references or other statements or facts provided in this publication are personal views and shall disclaim any liability for damages resulting from errors and omissions contained.

No comments:

Post a Comment

Site Disclaimer:
This blog is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the investment products mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks.

Past performance figures as well as any projection or forecast used are not necessarily indicative of future or likely performance of any investment products. The values of the mentioned investment products and the income from them may fall or rise over time. If the investment product is denominated in a foreign currency, it will be subjected to foreign exchange risk which may have an adverse effect on the performance of the mentioned investment products.

The information contained in these pages is not intended to provide professional advice and should not be relied upon in that regard. You may wish to seek advice from a financial adviser before investing in any of the products mentioned.In the event that you choose not to seek advice from a financial adviser, you should consider whether the investment product is suitable for you.

The contents of this blog, including these terms and conditions, are subject to change and may be modified, deleted or replaced from time to time and at any time. Any views, opinions, references or other statements or facts provided in this blog are personal views of the author. This blog is not associated with the author's brokerage firm.