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What Investors Can Learn From the Best and Worst IPOs Of 2014

Singapore’s IPO scene was rather lively in 2014 with 28 new shares being listed. Here’s a quick overview of all the IPOs.

In here, I wanted to look at the best and worst performers to see if there are any lessons we can draw from their experience. So, here goes.

The winners

The best-performing IPOs in 2014 have been TalkMed Group Ltd (SGX: 5G3), Starburst Holdings Ltd (SGX: 40D), and IPS Securex Holdings Ltd (SGX: 40A), in that order.

Share Listing date Listing price (S$) Price: 2 Jan 2015 (S$) % Change
TalkMed 30 Jan 2014 0.20 0.975 388%
Starburst 10 July 2014 0.31 0.63 103%
IPS Securex 30 June 2014 0.35 0.70 100%

Source: Shareinvestor

TalkMed’s a healthcare services provider and the company’s comprised of “a group of doctors providing tertiary healthcare services in the fields of medical oncology and palliative care to the oncology patients”.

In the company’s latest financials for the third quarter of 2014, its quarterly revenue climbed by 9% to S$15.6 million compared to a year ago. TalkMed’s bottom-line grew even faster as profit increased by 14.0% to S$9.6 million. The healthcare outfit ended the quarter with a rock-solid balance sheet as it carried S$41 million in cash while carrying no debt; it must be noted however, that some S$17 million of that cash had come from the  net proceeds of its listing.

Starburst is an engineering group that focuses on the design and engineering of defense training facilities. Being in the defense industry would mean that stringent quality standards have to be adopted. Starburst has no issue with that as it has achieved the ISO9001: 2008 certification and has also established a strong reputation in the region for the quality of its work, which is compliant with international standards.

The company’s steadfastness when it comes to delivering quality work has shown up in its numbers. According to my colleague Stanley Lim, “From 2011 to 2013, [Starburst’s] net income margin has grown from 26.4% to 41.5%; over the same period, its profit has surged by almost 50% from S$6 million to S$8.7 million.”

We now come to IPS Securex, the third best performing IPO in 2014. The company is one of Singapore’s leading providers of integrated security solutions. Formed in 1991, IPS Securex has since built up a track record of delivering customized and complex integrated security solutions on time and within budget. In addition, the company also has distribution rights to sell many security products throughout the Asia Pacific region.

IPS Securex has seen growth pick up in recent times, though there are still some warts. In the financial year ended 30 June 2014 (FY2014), the firm’s top-line expanded by 31% to S$12.4 million with its gross profit spiking by 49% to S$6 million; unfortunately, an increase in other expenses had resulted in the firm’s bottom-line declining by 35% to S$1.11 million.

The losers

As for the worst performers amongst newly-listed shares in 2014, we have Terratech Group Ltd (SGX: 40I), EMAS Offshore (SGX: UQ4), and PACC Offshore Services Holdings Ltd (SGX: U6C), in that order.

Share Listing date Listing price (S$) Price: 2 Jan 2015 (S$) % Change
Terratech 30 July 2014 0.23 0.095 -58.7%
EMAS Offshore 10 August 2014 1.21 0.55 -54.5%
POSH 25 April 2014 1.15 0.555 -51.7%

Source: Shareinvestor

According to Stanley in his article on the company’s listing, Terratech ”is a premium quality marble producer from Malaysia. It deals with the exploration, development, quarrying, extraction, removal, and processing of marble. The company currently owns a 33-year lease at the Kelantan Marble Quarry in Malaysia.” In his piece, Stanley also pointed out an interesting facet to Terratech’s business:

“[T]he company had commenced commercial production of its marble blocks in 2012 and it was only in February [2014] that the company had managed to book its “first sales of marble slabs to a third party customer.”

In Terratech’s latest financial results for the first half of the financial year ending 30 June 2015 (FY2015), its bottom-line improved from a loss of S$2.2 million seen a year ago to S$5.05 million. On first glance, that seems promising. But a deeper look reveals that the firm’s profit jump had been mainly due to a one-off fair value gain of S$8.8 million for the conversion of the firm’s convertible bonds. In other words, the stronger bottom-line had nothing to do with Terratech’s core business of producing and selling marble and related-products.

Moving on to EMAS Offshore and PACC Offshore Services Holdings – both of which provide support services within the oil & gas industry – there seems to be good reasons for their price declines. With oil prices falling by half since June 2014, most oil & gas-related shares haven’t done well. The balance sheets of both companies might have also given investors some pause – as of 30 September 2014, both firms have more debt than cash. EMAS Offshore and PACC Offshore have net-debt (total borrowings minus total cash) to equity ratios of 38% and 39% respectively – these aren’t exactly low figures.

Foolish Conclusion

From a brief look at the latest business on-goings of the six newly-listed firms mentioned above, it’s somewhat clear to see that their price performance thus far is at least partially tethered to their future business prospects and how well their businesses have performed.

So, an important takeaway here is that there isn’t anything special about newly-listed shares which would allow them to earn better returns for investors – just like shares which have been listed for a long time, it’s the quality of the business results of newly-listed shares which would ultimately determine how good their share price returns can be.

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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 James Yeo doesn’t own shares in any companies mentioned.