By: Kleer
Closing date of application: 17 December 2007
Commencement of trading: 19 December 2007
Established in the 1970's, JES is a major PRC shipbuilding group with production facilities capable of producing different types of vessels:
- Bulk carriers - for transportation of bulk cargo items such as ore, food staples, or similar cargo
- Containerships - for transportation of all kinds of containerised cargo
- Ocean engineering vessels - mainly crane barges for the offshore oil sector and construction building works
- Roll on/roll off vessels - designed to carry wheeled cargo, such as cars, trailers, or railway carriages
Their customers include major shipowners based in Europe, Canada, and Asia, including PRC.
Key Competitive Strengths:
- Revenue and profit has been growing annually at 109% and 110% respectively for the past three years.
- Their order book as of 30 June 07 stands at a record high of US$1,484.7m, which consists of 43 vessels to be delivered from July 2007 through 2011.
Key Growth Plans:
- To expand their production capacity significantly by building additional shipbuilding facilities on land adjacent to their existing Shiwei Yard, to be operational by 2009.
- To increase their operational focus on building larger, more technologically advanced vessels that command higher margin.
- To selectively and strategically venture into other shipbuilding related businesses, including ship repair services, when the suitable opportunity arises.
Pre-IPO Investors:
It has a strong list of pre-IPO investors, namely:
- Amaranth LLC
- Clariden Leu Ltd.
- OCBC Capital Investment Private Limited
- SkyVen Growth Capital Fund Pte. Ltd.
- Lim Oon Cheng
- Tan Keh Poo @ Tan Kay Poo
- Emirates Tarian Asset Management Pte. Ltd.
- Wang Yu Huei
- Marksman Capital Ltd
- Portchester Asset Management Ltd
- Pinetree Fund PteLtd
- Rotol Singapore Ltd
- IPC Peripherals (Pte) Ltd
- Gay Chee Cheong
- Tommie Goh Thiam Poh
- Chew Hua Seng
- Unibond Capital Limited
- Asset Grow Investment Limited
Financial figures
Intended IPO price: $0.67
No. of shares available for public offer: approx. 16.2m
No. of shares available for placement offer: approx. 356.94m
Total post invitation share capital: Approx. 1,144m
Note: Unaudited 2QFY2007 figures were available in the prospectus.
FY2006
Revenue: $230.2m
Profit: $24.9m
NAV: N.A.
EPS: 0.0218
EPS % Incr: 22%
PE ratio: 30.7x
Price: 0.67
2QFY2007
Revenue: $224.3m
Profit: $32.4m
NAV: N.A. (incl. IPO proceeds)
EPS: 0.0283
EPS Incr: 150% (Est.)
PE Ratio: 23.7x
Price 0.67
Dividend policy: No fixed policy.
Conclusion:
JES's closest comparable peer on SGX in Yangzijiang - one of the best performing S-shares. Ever since its listing in early April, it has almost tripled from its IPO price of $0.95 to a high of $2.90, before correcting to its current $2.06 due to the broad market correction.
Comparatively, JES has a smaller sales revenue and lower profit margin as compared Yangzijiang, but with the offshore shipping sector expected to do well in the next few years, Yangzijiang already trades at a hefty 47.5x FY07 PE.
JES is strongly tipped to follow in Yangzijiang's footsteps, thus it should do very well.
Nevertheless, to give ourselves a comfortable margin of safety, I am pegging JES at a Fair Value of $0.67 or 24x PE (IPO price) only.
Probability of getting allotted for the IPO - GOOD
I have only included the key points of the prospectus. Certain information have been omitted in order to keep my write-up short, but you can find the entire prospectus
here.
Source: Extraordinary Profits