Shares & Derivatives
JES Holdings IPO.
By Kleer  •  December 12, 2007
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:
  1. Revenue and profit has been growing annually at 109% and 110% respectively for the past three years.
  2. 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:
  1. To expand their production capacity significantly by building additional shipbuilding facilities on land adjacent to their existing Shiwei Yard, to be operational by 2009.
  2. To increase their operational focus on building larger, more technologically advanced vessels that command higher margin.
  3. 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
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By Kleer
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