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IPOs of 2013: How Have They Done?

Singapore skyline daytime - Copy Singaporeans might see a new Initial Public Offering (IPO) soon. It appears that Singapore Press Holdings (SGX: T39) will soon proceed with its plans to spin-off its properties into a real estate investment trust after mulling over a possible delay of the spin-off due to depressed share markets.

But until then, we have to make do with the total of 10 new IPOs that were floated on both the Mainboard as well as Catalist stock exchanges since the start of the year.

Let’s look at how they’ve performed.

Floated on Mainboard Exchange IPO Date IPO Price, S$ 10 July 2013, S$ Change
Tee Land Limited (SGX: S9B) 6 June 2013 0.54 0.41 -24.1%
Asian Pay Television Trust (SGX: S7OU) 29 May 2013 0.97 0.855 -11.9%
Soilbuild Construction Group 27 May 2013 0.25 0.3 20.0%
Croesus Retail Trust 10 May 2013 0.93 0.95 2.2%
Mapletree Greater China Commercial Trust 7 May 2013 0.93 0.945 1.6%
Overseas Education Limited (SGX: RQ1) 7 Feb 2013 0.48 0.69 43.8%
Floated on Catalist Exchange
International Healthway Corp 8 July 2013 0.48 0.435 -9.4%
GDS Global Limited 19 Apr 2013 0.25 0.26 4.0%
Halcyon Agri Corporation (SGX: 5VJ) 1 Feb 2013 0.36 0.775 115.3%
Logistics Holdings Limited 18 Jan 2013 0.23 0.205 -10.9%

The Good

The standout performers have been rubber producer Halcyon Agri and education provider Overseas Education with gains of 115.3% and 43.8% respectively.

Halcyon’s first earnings release since its IPO, for the first quarter of 2013, saw its quarterly earnings increase by 53% year-on-year to US$1.53m. The rubber producer’s earnings growth can be traced back to its higher gross margins as raw material costs declined.

Meanwhile, Overseas Education posted a 17.4% year-on-year increase in quarterly profit to S$5.2m in its latest first quarter earnings release. A 10.4% increase in the company’s top-line for the quarter stemming from higher tuition fees in its schools had trickled down to its bottom-line.

The Bad

After looking at the standouts, let’s turn our attention to the “standouts”. The worst debutants are Tee Land and APTT with declines of 24.1% and 11.9% respectively.

Tee Land’s a property developer and in its IPO-prospectus, one of the key risks its business faces is mentioned as such; “In the event that the Singapore government introduces new or more stringent measures which impact the overall performance of Singapore’s property market, our operations, profitability and financial performance may be adversely affected.”

Singapore’s government has recently put in place new, more-stringent-rules concerning property loans for buyers, which might cool-off the property market here. That might have spooked investors over Tee Land, since the new-property-loan-rules might be just the kind of risk that the company was warning its prospective investors about.

With APTT, a business trust which owns cable TV licenses in Taiwan, there have been concerns raised by analysts over issues such as its high debt load, interest expenses, and recurrent losses, among others. With a cloud of uncertainty hanging over it, coupled with the fear of rising interest rates due to a possible pull back in US’s stimulus efforts  – which could weaken the trust’s balance sheet further – it seems that investors aren’t willing to pay up to own a stake in it.

The Ugly

From the table above, it’s obvious that not all of the IPOs have proven to be profitable. But, from my own anecdotal experience with market participants’ reactions to IPOs, they find it to be an almost sure-fire way to make a profitable short-term punt. “It will definitely go up very soon after its first day of trading!” is a refrain I hear often.

Thing is, with IPOs, investors have to exercise extra caution because most prospectuses only contain two to three years’ worth of the new issue’s financial performance. This makes it hard to make a judgement on the long-term viability of the new issues’ business model as well as the quality of management

Ultimately, businesses with poor corporate results stemming from – highly likely – untenable business models and/or bad management are often bad investments. IPOs are no different.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.