Subscribe for IPO @ $1. The balloting results were out (already got the refund) and they'd upsized the issue to $400M Everyone who applied got alloted (Min. apllication of 100 shares = $10k will get 30 shares = $3k). Some ballot info,
| Applied |
Alloted |
| 100 |
30 |
| 110 – 290 |
50 |
| 300 – 490 |
70 |
| 500 – 990 |
110 |
Before applying, I checked and had the following thoughts,
- They had to offer 6% (cumulative even, and step up to 8% in 2018 if not redeemed), which is high compared to the prevailing market interest rate. Possible reason is, they are highly geared and it's unlikely the banks will lend them. So, risk is actually very high.
- The funds raised will be used for new projects, so don't expect any new income stream to quickly come online.
- Due to the above points, I checked their latest FY10 results. Net Profit was $88.9M, so there ought to be enough to pay the $24M (6% @ $400M Pref Shares), assuming the Income Stream is stable based on FY10 results. FY09 Net Profit was lower at $74.3M.
- I didn't analyse their Cash Flow Statement to check their ability to pay the Pref Shares Dividend but according to a BT article (22-Apr-11), the FCF (Free Cash Flow) are FY10 = $81M ; FY09 = $47.5M ; FY08 = $6.2M. So, $24M dividend is OK if FCF is the same as FY10 or FY09 and impossible for FY08.
Since everyone got alloted, the price may hover around the $1 price if all take profit. But, as both the Private Placement and Public Tranche were heavily over-subscribed, I think there's a good chance it'll open above $1 (I was expecting $1.03 to $1.05, using the less risky recent DBS Pref 4.7% as a reference).
My plan is to either stag if the price is attractive (Listing on 26-Apr-11 9am) or if stuck with it, to monitor the Quarterly results closely to judge their ability to pay the dividends.
