4 Things You Need To Know About the IPO of Secura Group Limited

Credit: Simon Cunningham

The next company to debut on Singapore’s Catalist board this year will be Secura Group Limited.

This comes after two listings on the same board this year of centralished dishwashing outfit GS Holdings Ltd (SGX: 43A) and clean air technological solutions provider Eindec Corporation Limited (SGX: 42Z).

Here’s what you need to know about the IPO (initial public offering) of Secura Group.

1. The nitty gritty

Secura Group will be selling 112 million new shares in the IPO at S$0.25 apiece. Of the 112 million shares, 108 million will be sold in a private placement to certain investors, while the remaining tranche of only 4 million will be available for the public.

A unique aspect of this IPO is that each share comes with two detachable warrants, which can each be converted into one new share of Secura at an exercise price of S$0.35 over the next three years.

Secura is looking to raise S$28 million in gross proceeds from the IPO. Of that sum, 7.1% has been earmarked for expenses related to the IPO. Meanwhile, 52.8% of the proceeds are meant for expansion of the company’s business, while the rest are for working capital and equipment and infrastructure upgrades.

The offer closed at 12 noon today and shares of Secura Group will begin trading on the Catalist board at 9am on 28 January 2016. At its listing price of S$0.25 per share, Secura will have a market capitalisation of S$100 million at the IPO.

2. The business

Secura Group was formed via the merger of two business groups: The Soverus group and the Secura group.

The former offers cyber security and related consultancy services, unarmed, manned security guarding services for commercial premises, and even distribution services for homeland security products such as identification and detection systems.

The latter, meanwhile, provides security printing services for documents, such as bank cheques and passbooks, parking coupons, cash vouchers, and more. It has over 35 years of experience in the business and owns one of the largest cheque printing businesses in Singapore.

All told, the entire Secura Group has four main business segments, namely Security Guarding; Security Printing; Cyber Security, Technology & Systems Integration (CTS); and Security Consultancy & Services. These allow the company to be a one-stop security solution provider for its clients.

Secura business segment chart
Source: Secura Group’s IPO prospectus (click chart for larger image)

At the moment, the two most important business segments for Secura Group in terms of revenue generation are Security Guarding and Security Printing. You can see this in the chart above.

3. Future growth plans

Secura Group is looking to explore growth in all its existing business segments by riding on a number of important trends.

The company believes that the rise of the Internet of Things, the increasing use of information and data analytics by businesses, and the threat of cyber-attacks on organisations can help drive growth in the cyber security market in Singapore and beyond.

Meanwhile, Secura Group also thinks that the demand for homeland security products and services in Singapore will increase as a result of multi-faced threats posed by international terrorism, piracy, trafficking, and more.

Although Secura Group’s Security Printing business segment may be facing headwinds as the use of things like postage stamps and cheque books seem to be declining, the company believes that its services in the Security Printing area will still be in demand as “counterfeiting continues to be a widespread problem.

Lastly, Secura Group also thinks that government support for the security-guarding industry can be useful. In its prospectus, the company commented that Singaporeans have “shunned the security services industry due to its long hours and relatively low pay.” But, the government has put in place measures that the company believes can help increase wages and improve the standards of the industry, thereby attracting more people to join this line of work.

4. Valuation

According to its prospectus, Secura Group is listing at a modest 8.9 times earnings for 2014, based on a pre-IPO share count of 288 million shares.

But, it is worth noting that (a) the company’s profit for 2014 includes a one-off gain of S$5 million (vs. S$6.58 million in net profit for the year) and (b) the share count for the firm is projected to rise to 400 million at the IPO.

Elimination of the one-off gain will lead to a profit of S$3.2 million in 2014. And, if that profit figure is used alongside Secura Group’s expanded share count, the firm will have a price-to-earnings (PE) ratio of 31 instead of 8.9.

Moreover, investors may want to keep the two detachable warrants in mind as well. In the event that all the warrants are exercised, it will result in the creation of 224 million new shares.

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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.