For some reason, I don’t usually get lucky in IPO balloting process, especially if they are those which are oversubscribed by many fellow retail investors. The latest incident was the SPH Reit. Balloted and failed. Another $2 wasted.
This week, we have the “ValueMax Group”, one of the oldest pawnbroking chains in Singapore, launching a $70 Million IPO seeking to be the first in its industry to list on the mainboard of the Singapore Exchange. Previously, MoneyMax and MaxiCash have been listed on the catalyst.
Based on the way the company is offering the shares to the public, it looks like another $2 going right to the bin. The company is issuing 138 Million shares at $0.51 each –> 133 Million under the placement tranche and only 5 Million under the ATM tikam scheme.
The last ballot for the public will be on the 28th October 12pm.
Performance against Peers
So how do ValueMax fares against its peers, MoneyMax and Maxicash?
Let’s break it down more in details.
For the purpose of the analysis, I will be using the Dupont ROE as a method of analyzing their respective income and balance sheet statement, touching on both their operational and financial efficiency for FY2012.
Return on Equity (ROE) = Profitability (Net Income/Sales) x Operating Efficiency (Sales/Assets) x Financial Leverage (Assets/Equity)
1.) Profitability – MoneyMax > MaxiCash > ValueMax
ValueMax ranks bottom at 2.9% compared to the other two – MoneyMax at 7.7% and MaxiCash at 4.1%. This is largely due to the small margin of their retail gold business as compared to their pawnbroking business which yields a healthy margin of over 90%.
2.) Operating Efficiency – ValueMax > MoneyMax > MaxiCash
ValueMax ranks top at 2.7x and way ahead of the other two by a large mile. MoneyMax’s operating efficiency of utilizing its assets in terms of sales only stood at 0.52x while Maxicash at 0.51x.
3.) Financial Leverage – MaxiCash > MoneyMax > ValueMax
ValueMax ranks the best here by using the least financial leverage at 2.54x. MoneyMax used the most leverage at 3.67x while Maxicash’s financial leverage stood at 3.07x.
With this 3 factors in consideration, ValueMax’s ROE ranks top at 18,22% while MoneyMax is a little behind at 14.72%. At the bottom of the three, MaxiCash ROE was lowest at 6.54%.
Translating this into PE valuation, ValueMax FY 2012 PE is trading at 12x while MoneyMax at 25x and Maxicash at 48x.
In terms of dividend yield, ValueMax will be paying out 50% payout ratio which translates to about 1.5% yield on Offer Price. MaxiCash is yielding 2.5% while MoneyMax doesn’t pay any dividends.
Is it worth to ballot and flip?
Let’s be honest. The public ATM tikam tranche was only offered 5 Million. So chances are you are not going to get much from the ballot, even if you bid in excess of 100 lots. If you look at previous MaxiCash IPO results, you would notice that even the top bidders only gets about 7 lots and that comes with a very small probability of getting it.
So how will this fare on their first day of trading? The FA are all pointing in favor of ValueMax ahead of the other two peers and I would actually be very surprised to see them trading underwater on their day of trading. But stock market is stock market and it can be crazy at times. So no one can guarantee anything.
Am I going for this?
Compared to its peers, I’m actually quite impressed by the figures for ValueMax based on its prospectus.
Anyway, I have went for the bid. To increase my chances of getting them, I have submitted the bid at the middle to high range where I think the probability is going to be the highest. Let’s see if I get luckier this time round.