Tough Business Conditions - NOL, Vard Holdings

[Previous post: Twice Lucky in a Month? - Asian Pay Television Trust IPO]

NOL (Shipping & Logistics Chain)
NOL reported a US$76 million profit on the back of the sale of its NOL headquarters building. Without the gains from the sale, it would still be in the red with EBIT at -US$85 million. The company has been having a very tough 2-3 years due to supply glut of liner vessels putting pressure on shipping rates but it seems that with a new CEO and leadership team, the cost cutting measures have become more aligned and aggressive to unlock value for shareholders in these tough times. For both liner and logistics, core EBIT losses have been narrowed and it is now in a stronger cash position after tapping new loans and increasing investment in PPE with cash from its sale of the building. Having said these, its performance is still highly correlated with shipping rates where there still seems no end to the oversupply of vessels. Europe and US are still in the doldrums and economic trade has not improved much compared to 2012.

• Black candlesticks for the last 5 weeks of trading. Share price has been plunging since the start of 2013 until a strong resistance at $1.10.
• MACD - seems to be turning upwards weakly.
• RSI (25w) - still downtrended
• Chance of technical break on narrowing losses - $1.18 (8% from current levels) Chances are traders will take this chance to buy at a low/major resistance and attempt a short term trade on NOL. Given that prices have been sliding since the start of the year, this announcement today may give some relief to the selling pressure. 

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VARD (Shipbuilder,Offshore Services Company)
Previously known as STXOSV, Vard has had its share prices fall since Oct 2012 after poor quarterly results in Nov and a price offer for shares by Fincantieri at $1.22/share. Vard had secured new contracts for 3 OSCVs worth some 3 NOK million in the first quarter, one of the slowest start since 2009. Delivering only 5 out of its 24 vessels scheduled for delivery this year, EBITDA has fallen some 23% in 1Q2013. Cash position has also dipped to 2 NOK billion from 3 NOK billion in March 2012.

• Share price slide since Oct 2012 with little indication that there will be a reversal in trend. 
• MACD - is negative but with some chance of turning upwards.
• RSI (25w) - trending downwards towards 30%. 
• Bad news and bad technical chart - $0.90 (-15% from current levels). It does seem that investor interest in this stock has been waning since 2011 when its prices were on a one way trajectory. Oct 2012 has marked the start of its share decline and so far there is still no good news to send its prices up. Bad news, bad technicals. Go short.

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Twice Lucky in a Month? - Asian Pay Television Trust IPO

Previous post: [Upcoming IPOs - Croesus Retail Trust & Asian Pay Television Trust]

Introduction to Asian Pay Television Trust IPO
Asian Pay Television Trust will list in the shadows of Croesus Retail Trust that went live on 10 May to a tremendous investor appetite for the high-yielding IPO. So, will it be a repeat of the stellar performance of Croesus Retail Trust?

Key figures

1. S$0.92 to S$1.00 per share indicative price range
2. 7.29 to 8.25% dividend yield (2013-2014) on a semi-annual basis (30 June and 31 Dec) based on the highest offer price of S$1.00
3. S$1.4 billion expected to be raised
4. 9 cornerstone investors including Quantum Vehicle, the investing fund controlled by the legendary George Soros

[Link to lodged prospectus @ MAS here.]

If you are a new IPO investor, do check out my blog page on Guide to IPO Investing.
Even if you are a seasoned IPO investor, you may wish to check out 2012 and 2013 IPO listing performance at SG IPO Statistics for more insights to optimise your balloting chances!

Timetable
Prepare to start applications on 17 May till 27 May. Listing date targeted 29 May 2pm.

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Analysis of the IPO
Details are still tentative and dependent on the decided indicative price as the book building process is still underway so here are snippets of what I have read/heard/seen and my initial thoughts. More to follow when the figures are finally decided.

1. High yield of 7-8% for 2013 and 2014
1. [The good] This yield, similar to Croesus Retail Trust's yield range, is going to appeal to yield hunters. The performance of the Croesus Retail Trust IPO serves to remind many of us, purported contrarians, that the yield-hunt is yet to be over and there is still much more yield compression that we will see. The next high-yield equity IPO that listed before Croesus Retail Trust, Mapletree Greater China Commercial REIT, listed in March this year has already appreciated by 20% from its listing price and 8% from its first day close. More statistics here.
2. [The good] A clear distribution policy where the trust will distribute 100% of its distributable free cash flows on a semi-annual basis.
3. [The bad] that seems slightly more risky than initially thought (as with the Singaporean mentality, we favour questioning items that seem too good to be true; being critical is a trait though)
2. High cornerstone and institutional take-up S$451 million of the IPO, almost 32%.
1. [The good] There will be adequate price level support for the listing period
1. <1% of total units (25 million units) offered in the Public Offer. 
2. 66% placement tranche
3. ~32% of total units will be held by cornerstone investors
2. [The bad] If you had complained about your Croesus Retail Trust IPO balloting results, this public offer would have an even smaller chance of a successful ballot.
3. Business trust concept
1. [The good] Business trusts on the SGX tend to operate with a slightly higher forward-looking yield so it can be said that there is still further upside to their prices in this chase for yields. 
2. [The bad] Truth is, business trusts listed in Singapore tend to be less favoured by investors as compared to REITs basically of their operating structure. In short, business trusts are more complicated in their value proposition. REITs also pay less taxes on their income in Singapore.
3. [The good] Asian Pay Television Trust yield of ~7-8% (based on S$1 offer price) puts it as the 2nd highest forward-looking yield business trust on the SGX, where the next closest is Croesus Retail Trust (6.5% at S$1.145), K-Green trust and Hutchinson Port Holdings. It is only surpassed by Religare Health Trust of 8.4%.
4. Taiwan infrastructure play that is also the only one listed on the SGX
1. [The good] Ideal for retail investors seeking exposure to Taiwan and cable television market. The cable television market in Taiwan is the 5th largest in Asia by revenue.
2. [The good] It has good comparative advantage in the pay-TV business as it is one of the 3 largest operators in Taiwan. 

Market Outlook
Just a quick highlight, Croesus Retail Trust closed with a first day gain of 23% above offer price. This just served to highlight the tremendous liquidity that the Singapore financial market has been enjoying and that high-yielding equity are still hot in demand despite the yields reflecting their relative risk. Contrary to some belief that the yield-chase is over in 2013 and beyond, the economic story has yet to brighten and we can see that yield compression is still taking place actively in the markets of today.
More IPO statistics here.


Conclusion of the IPO
In essence, I am sensing a repeat of the stellar performance of the Croesus Retail Trust IPO. Maybe slightly more muted given that Croesus Retail Trust has already satisfied some demand but definitely not too far off. In fact, there are huge similarities to be drawn between these IPOs of 2 business trusts. They are similarly operated overseas, so Singapore will not be able to see their assets being put to work first hand. Like Croesus Retail Trust, which had a poor gearing ratio above many other concerns, this trust is not without them. But as it seems, the market is intent on ignoring these risks in search of high-yielding equities. This trust has a huge offering, surpassing the Mapletree Greater China Commercial Trust of S$1.3 billion, which will be a truer test of the capital market in Singapore and the clamor for yield even in 2013. For now, let's wait for the price to be finalised before making a decision based on the institutional demand.

All quoted figures in Point 3 are derived from the OCBC Investment Research S-REITs Tracker Compilation dated 13 April 2013. As it is an uncirculated copy, I did not upload it; I am sure you can get it from your broker or more updated data from Bloomberg terminals.

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Croesus Retail Trust IPO Ballot Results

Previous post: [Update to Croesus Retail Trust IPO]

Ballot Results of the Croesus Retail Trust IPO are out as of 9 May 2013 and can summarised as follow

• 229 million shares for placement and public tranche
• 207.6 million shares for placement tranche
• 21.5 million shares for public tranche
• 22.4x oversubcribed in total
• 48.8x subscribed for placement tranche shares
• 19.7x over subscribed for the public tranche shares
• Shares at S$0.93 each
• Expect 8% yield for the first year; Expect 8.1% yield for the next.

Shares will commence trading on a "ready" basis at 2pm on Friday, 10 May 2013!

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The big question is how will it fair on debut and thereafter?

My Commentary on Croesus Retail Trust IPO dated 5 May 2013
Blog post here - Wrong Gears for the Wrong Crowd? - Croesus Retail Trust

Current IPO market conditions
Here's a quick review of the recently listed IPOs and their performances. More data for the full 2012 to 2013 here at SG IPO Statistics page.



In fact, only Logistics Holdings IPO has taken a beating, closing below IPO offer and first day last done prices (-9% and -21% respectively). The other notable counter is Geo Energy Group that is a +32% from IPO offer price but -1% from first day last done price.

Statistically, it means that out of the last 12 IPOs, even if you bought at first day close (the irrational exuberance phase, or in layman 'the pop') you would have made a profit of at least 2% (GDS Global IPO)! If you had obtained the IPO on offer price, you could have made up to 70% by just holding the stock from offer price to date (Gaylin Holdings). In addition, the figures quoted here are unadjusted for dividends that had been paid out by these counters along the year.

Current REITs/Trusts IPO market conditions

If you refer to the table above, the yellow highlighted text pretty much sums up the whole IPO + REITs/Trusts story. Any of these 4 REITs/Trusts would have yielded a good +10% on capital whichever way you look at it, plus more from the dividends that they have been paying out. 

Year 2012/13 IPO Demand Statistics
For the more demanding investor, to have a greater feel of the local demand for IPOs, do check out my compiled "IPO SG Statistics" page for more details!

Also, do bookmark this page // add Healthytrading blog to Twitter // subscribe to RSS feed // subscribe to email feeds to receive latest market news that will move your money. 

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