IPO News - YongMao Holdings Limited
Posted On Thursday, February 14, 2008 at at 9:13 AM by Finance AnalysisYongmao Holdings Limited, a designer and manufacturer of a wide range of towercranes and towercrane components and accessories in the People's Republic of China ("PRC"), launched its initial public offering ("IPO") today, in conjunction with its proposed listing on the Mainboard of the Singapore Exchange Securities Trading Limited ("SGX-ST").
Yongmao offers a wide range of towercranes and towercrane components and accessories under its own brands -"YONGMAO" and "SUNCRANE". To date, the Company has developed approximately 50 models and sub-models of towercranes. Used mainly in construction sites, infrastructure projects and in the shipbuilding industry, Yongmao's towercranes are sold mainly to construction equipment distributors and equipment rental companies in overseas markets and to construction companies and equipment rental companies in the PRC.
Yongmao's towercranes are sold and exported by Yongmao and/or its customers to many countries in America such as the United States and Panama, Africa such as Zambia and South Africa, Middle East such as UAE, Saudi Arabia and Bahrain, Europe such as Belgium, UK and Ukraine and Asia such as Hong Kong, Macau, Singapore, Indonesia, Thailand, South Korea and India.
Yongmao's invitation comprises 111,550,000 new shares ("New Shares") at $0.35 per share, of which 3,800,000 are offer shares and 107,750,000 are placement shares. The invitation representing approximately 25.1% of the Company's enlarged share capital of 443,750,000 shares, is being launched at a historical price-to-earnings ratio of approximately 9.9 times, calculated based on its historical net earnings for FY2007 and a pre-invitation share capital of 332,200,000 shares.
The Company is expected to raise net proceeds of approximately S$35.4 million from the issue of the New Shares, of which approximately S$31.6 million will be used for the construction of a new manufacturing facility and for the acquisition of plant and machinery. The remaining proceeds will be used for working capital purposes.
CIMB-GK Securities Pte. Ltd. is the issue manager, underwriter and placement agent for this IPO. The IPO will open from 1 February 2008 to 19 February 2008, 12.00 noon. Trading on the SGX-ST is expected to commence on 21 February 2008.
Attractive Industry Prospects Globally
Yongmao believes that in the short term, the industry will be facing a shortage in capacity to meet the demand and technical requirements for towercranes of the higher-class tonnage that Yongmao manufactures. Accordingly, it is expected that the supply of towercranes will remain tight in the next few years.
Focused Growth Strategy
Going forward, Yongmao intends to expand its production capacity to meet the increasing demand. A new manufacturing facility is currently under construction and is expected to be completed by about the end of 2008. This new facility, if fully equipped, is expected to have approximately double the capacity of the existing manufacturing facility in terms of production capacity for towercranes.
Source: Remisiers Research
Prospectors: Click Here
Conclusion by Extraordinary Profits:
Unlike the usual small cap china companies, Yongmao has the advantages of having a strong parent company in Tat Hong, and a business that has high barriers of entry.
Because of that, I believe that Yongmao should trade at the higher end of valuations for typical small cap stocks.
Yongmao should trade at a Fair Value of $0.68 or 10x PE only.
Probability of getting allotted for the IPO - LOW
Yongmao offers a wide range of towercranes and towercrane components and accessories under its own brands -"YONGMAO" and "SUNCRANE". To date, the Company has developed approximately 50 models and sub-models of towercranes. Used mainly in construction sites, infrastructure projects and in the shipbuilding industry, Yongmao's towercranes are sold mainly to construction equipment distributors and equipment rental companies in overseas markets and to construction companies and equipment rental companies in the PRC.
Yongmao's towercranes are sold and exported by Yongmao and/or its customers to many countries in America such as the United States and Panama, Africa such as Zambia and South Africa, Middle East such as UAE, Saudi Arabia and Bahrain, Europe such as Belgium, UK and Ukraine and Asia such as Hong Kong, Macau, Singapore, Indonesia, Thailand, South Korea and India.
Yongmao's invitation comprises 111,550,000 new shares ("New Shares") at $0.35 per share, of which 3,800,000 are offer shares and 107,750,000 are placement shares. The invitation representing approximately 25.1% of the Company's enlarged share capital of 443,750,000 shares, is being launched at a historical price-to-earnings ratio of approximately 9.9 times, calculated based on its historical net earnings for FY2007 and a pre-invitation share capital of 332,200,000 shares.
The Company is expected to raise net proceeds of approximately S$35.4 million from the issue of the New Shares, of which approximately S$31.6 million will be used for the construction of a new manufacturing facility and for the acquisition of plant and machinery. The remaining proceeds will be used for working capital purposes.
CIMB-GK Securities Pte. Ltd. is the issue manager, underwriter and placement agent for this IPO. The IPO will open from 1 February 2008 to 19 February 2008, 12.00 noon. Trading on the SGX-ST is expected to commence on 21 February 2008.
Attractive Industry Prospects Globally
Yongmao believes that in the short term, the industry will be facing a shortage in capacity to meet the demand and technical requirements for towercranes of the higher-class tonnage that Yongmao manufactures. Accordingly, it is expected that the supply of towercranes will remain tight in the next few years.
Focused Growth Strategy
Going forward, Yongmao intends to expand its production capacity to meet the increasing demand. A new manufacturing facility is currently under construction and is expected to be completed by about the end of 2008. This new facility, if fully equipped, is expected to have approximately double the capacity of the existing manufacturing facility in terms of production capacity for towercranes.
Source: Remisiers Research
Prospectors: Click Here
Conclusion by Extraordinary Profits:
Unlike the usual small cap china companies, Yongmao has the advantages of having a strong parent company in Tat Hong, and a business that has high barriers of entry.
Because of that, I believe that Yongmao should trade at the higher end of valuations for typical small cap stocks.
Yongmao should trade at a Fair Value of $0.68 or 10x PE only.
Probability of getting allotted for the IPO - LOW
