The Baltic Dry Index

The Baltic Dry Index, a measure of shipping costs for commodities, fell last week as a four-month Argentine farmers' protest curbed Atlantic cargoes.

For those invested in shipping related stocks, you may want to keep track on this via:

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The Edge 19 July 08 - Beating The Credict Crunch

The recent spike in credit spreads caught a lot of investors off guard but there are products now available, even in the private bank market, that can offer a good hedge against short-term credit spread widening.
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Oil prices retreat, but fears of rebound remain

After shooting up at blinding speed, the price of crude oil has come down even faster - plunging US$10.50 a barrel in just two days. This reversal and a quick rally late yesterday following a Nigerian pipeline explosion have got the market confused.

'It's anybody's guess where prices will head next,' one trader said, while another economist believes that this is just a temporary respite and 'not a tipping point yet'.

After hitting an all-time high of over US$147 a barrel just last Friday - and threatening to breach US$150 - crude oil had slipped to just over US$134 in Asian trade yesterday afternoon, following the slide in New York on Tuesday and Wednesday.

This meant relief for some and fresh worries for others. Singapore Airlines' stocks gained 38 cents or 2.6 per cent from the latest oil price fall to close at S$15.06. Meanwhile, the stocks of alternative energy players were hit. Biofuel/palm oil stock Wilmar fell 23 cents to S$4.31, while Straits Asia, which has coal mine assets, closed at S$2.78, down 15 cents.

In London, oil rose above US$136 a barrel yesterday as investors resumed buying after the recent sharp drop and boosted by fresh cuts to Nigerian oil output.
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Exposure to Fannie and Freddie drags Asia down 16 July '08

Stocks in Asia plunged yesterday as investors reacted to news that the largest banks in the region had billions of dollars invested in debt securities issued by crisis-hit US mortgage giants Fannie Mae and Freddie Mac.

Reports of depositors queuing to withdraw their money from failed US mortgage lender IndyMac Bank on Monday also revived fears that more US banks could collapse, sending shivers through the wider financial sector.

In Japan, the Nikkei-225 index ended 2 per cent lower as banking and insurance stocks tumbled after local business daily The Nikkei reported that the country's three biggest banks, including Mitsubishi UFJ Financial Group, had some 4.7 trillion yen (S$60 billion) worth of exposure to debt securities issued by Fannie Mae and Freddie Mac as at end-March.
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Healthway Medical- Post IPO Review

This is a disaster to many retail investors in IPO.

Healthway Medical, share offer price at 36 cents and closed at the lowest 22.5cents on the debut day. A cool 37.5% loss in just one day!

What disturbing me are reading these lines prior to the opening on 4 July 2008:

What a good news! Despite all the bearish condition, this IPO has gained 6.6 times over subscription! But what has happen on 4 July 2008 is a clear reflection of a different story: The stock promptly dropped after opening bell at 24 cents and finally settled at the lowest 22.5 cents at the closing bell.

This stock is clearly overpriced at more then 27 times price earning ratio (PER) when its peers trading at lower then 13 times. The closing price of 22.5 cents valued the company at 17 times PER.

I am not too sure how 449 good investors have pooled the fund to subscribe 6.6 times the disaster shares. Lack of education probably the only reason to blame.

The only extraordinary advantage of this company is that they have one of the most handsome CEO in Singapore.

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Heng Long & Healthway Medical IPO Review

After making a small fortune from strong debut of Mencast, the overall market sentiment has worsen dramatically. In fact, Mencast itself has plunged below IPO price significantly lately.

There are 2 IPOs on the table now: Heng Long International and Healthway Medical.

Heng Long International is one of the largest independent tanneries of crocodilian leather in the world. The valuation is slightly high with PE ratio of 8.2 times and I have no intention to second guess the consumer spending pattern for luxury goods under high inflation environment. This IPO debut is predestine to open below water.

Healthway Medical is the owner of a network of over 80 clinics, which consist of both primary healthcare clinics and specialist wellness clinics. The valuation is exorbitantly high at over 27 times. Their peers currently traded at an average not more then 13 times now. The prospect of health care is bright in Singapore but we cannot expect 50% to 100% jump in profit every years to justify the valuation. In this bear market, I am not going to invest my money into any company with high PER. When I realized that some have effective cash cost of just 0.73 cent in compare to 36 cent, I am not interested at all anymore. This IPO will have the same fate like other recent IPO. I do expect the debut at below IPO price, subsequently plunge below 20 times PER in very short term and finally find equilibrium with its peers at 13 times. Finger cross for those applied.

Avoid these two IPOs. I believe we will see under subscription in this round. Out of these two, Healthway Medical is the worst candidate. The current market has no strength to support any new IPO, even with good fundamental and prospect.

Healthway Medical is scheduled to commence trading on 4th July 2008 and Heng Long International on 9th July 2008.
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Heng Long International Ltd IPO Review

Heng Long is an independent tanneries of crocodilian leather. This IPO application is scheduled to close on 7 July 2008.

The review will be published next week after my salary pay day.

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China Fibretech Ltd IPO Review

Close of Application 12.00 noon on 26 June 2008
Balloting of applications 27 June 2008
Commence trading 9.00 a.m. on 30 June 2008
Underwriter and placement agent Westcomb Securities Pte Ltd
Invitation shares 133,653,000 Shares
Public Offer 2 million (1.5% of overall offer)
Offer Price 21 cents

China Fibretech, based in Shishi in southern China's Fujian Province, dyes and post-processes cotton, polyester and mixed-knit fabrics. It is a pure fabric processing service provider. This is the second IPO in same sector from China after China Taisan on 6 June 2008. The next 2 coming IPOs is Qian Feng Fabric Tech and Zhongguo Pengjie Fabric.

China Taisan went IPO at 24 cents on 6 June 2008 and subsequently announced their trebled Q1 profit on 17 June 2008. However, their share price is currently trading with 8.3% discount at 22 cents today (9:38am, 24 June 2008).

In term of growth of revenue and net profit, China Fibretech is not as impressive as China Taisan. Laterally, I do not expect China Fibretech to outperform China Taisan or their market brother like Li Heng and China Sky.

I am bearish on this stock. For exposure to China fabric industry, we are spoilt with plenty of choices in the market. Get it from the open market with a discount if you must own a piece of China Fibretech. I do expect under subscription or less then 1.5 times over subscription for this counter. Therefore, please be prepared to get full allocation of the application.

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Mencast Holdings Ltd - IPO Review

Close of Application 12.00 p.m. on 23 June 2008
Balloting of applications 24 June 2008
Commence trading 9.00 a.m. on 25 June 2008
Sponsor, underwriter and placement agent CIMB-GK Securities
New shares 22.5 million
Public Offer 1.5 million (6.67% of overall offer)
Offer Price 28 cents



MENCAST Holdings, a local manufacturer and supplier of sterngear equipment and provider of sterngear services has launched an initial public offering for a listing on the Singapore Exchange's Catalist board.

The company leverage on its strategic location in Singapore to reach out to shipyards around Southeast Asia to provide sterngear equipment and services to the offshore oil, and gas and marine industry. For those have a hard time imagine what is sterngear, you may visit the Company website for more photographs.

Upon the completion of the IPO, the major shareholders still hold 125,000,000 Shares, representing approximately 84.7%. They have each undertaken not to sell for the first 6 months and not to reduce below 50% of the current holding in the next 6 months. In another word, the share in the public hand for trading is very much limited. This is very positive because the founder and the major shareholders still hold large stake in the company after the IPO and unlikely to abandon the company.
At 28 cents a share, the offer is priced at a historical price-earnings ratio of about 7.3. This is based on its earnings per share of 3.85 cents on pre-invitation capital for the financial year ended 31 December 2007. Post IPO, the calculated PE ratio is about 8.6 with earning per share of 3.27 cents. This is about comparable with other offshore supporting industrial and deemed reasonable. The prospect of this sector is still buoyant in 2008 and coming years, therefore offer room for price to soar.

Pre-IPO investors have entered earlier with the price of 19 cents. In comparison with the offer price of 28 cent, the immediate gain of 9 cents or 47% cannot be considered bonanza. They too have taken the same undertaking to restraint the sale.

I am very happy to have a home grown IPO entrant which associated themselves with hot offshore oil, and gas and marine industry. Instead of investing directly into offshore plays which has high PE ratio and larger exposure to risk of sudden pull back of crude oil price, this counter offer a good alternative.

The growth of revenue, profit and profit margin is more then excellent. If they manage to maintain the same pace of growth, the PE ratio in 2008 is estimated to be below 5.

I am bullish on this IPO entrant in view of the following factor,

1. Limited share free float - Easier to be speculate
2. Reasonable price-earnings ratio
3. High profit margin
4. High CAGR
5. Hot sector – offshore oil, and gas and marine industry
6. Rare Made in Singapore brand (instead of Made in China)

I believe this IPO will attract much higher subscription rate then the last few entrants. I will risk my $2 for application via ATM before the closing date.

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Indiabulls Properties Investment Trust - Post IPO Review

New!The public application is over and the company is scheduled to list on 11 June 2008 2:00pm.

The public subcription portion left with 13.3% not subscribed by the Public!

The good news is all those applied for IPO get FULL allocation as they wished (if you think this is a good news). To be exact, there is 1,344 applicants for public subscription portion. The bad news is 1,754,000 common share or 13.3% found no subscriber and have to be allocated to the Placement Tranche.

Offering price is $1.00. It will be interesting to see how the price move in current market turmoil.
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Sino Construction launches IPO - Review

SINO CONSTRUCTION LIMITED
Indicative time/date Event
12.00 noon on 10 June 2008 Close of Application List
11 June 2008 Balloting of applications
9.00 a.m. on 12 June 2008 Commence trading on a “ready” basis

Offer Price at $0.39 each

Not much energy to talk about IPO now because of last night DJ doing a stunt show. Not that my hsi put is not enough to please me (allow me to show off a bit, sorry :-)), but, who want to invest in IPO in coming week?

The public offer share is only consist of 4.1% of overall invitation share. To my knowledge, currently there is no pure China construction stock listed in SGX. Therefore, no direct comparison is possible.

As usual, all Sino figures look fantastic: Good revenue growth, good profit growth and strong cash flow. But that is what happened in the past.

NTA is 17.99 cents compare to IPO price of 39 cents. For construction stock, NTA normally do not carry too much weight. Who want to buy a second hand concrete mixer truck and tower crane? Anyway, we can take it as a consolation.

Sino has price earning ratio, PE of 5.89 times which is lower then CIMB compiled Singapore construction stock average of 7.8 times (Lowest Hor Kew: 5 times, Highest Tat Hong: 10.4 times).

What I want from a China IPO is potential explosive growth in hot sector. Construction….. may be last year, but not in today’s term or near future. Please do not expect Sino going to involve in Sichuan reconstruction contract too, simply because Daqing and Siquan are too far apart.

The market sentiment is going to worsen in coming week. The market volume is decreasing daily. I will definitely not going to apply for balloting.

The valuation at 39cent is fairly valued, but I expect you can get it from the post-ipo open market with a good discount.

If you really want to have a piece of action from China Construction stock IPO, I would advise to apply it on the last day last minute to gauge the market sentiment. Good luck! Read more!

Indiabulls Properties Investment Trust IPO Review

In layman perspective
- very bold ambition to push through the business trust in this timing
- two previous listing have been withdrawn: Altitude Aircraft Leasing Trust and Arcapital Utility Trust.
- Give exposure to India’s Mumbai property market
- Various forecast given for DPU based on different assumption.
- In worst forecast, DPU for 2009 can be lower then 3%, but if all engines fired, 5.1%
- For 2010 (if you really keep that long), they forecast growth of DPU slightly above 90%. Impressive!

Can this trust give more value then others business trusts in SGX?

My intuitive answer is NO.

OCBC preferential share give 5.1% yield with capital guarantee. Well, I know technically it is not, but, you think OCBC can go belly up?

Step 1, look at the yield from real estate sector – REIT. The average yield is 6.82% now (according data from http://reitdata.blogspot.com/ ). The Bull face pale.

REIT Period DPU ct Price Yield
LMIR Q1 : Mar-08 2.20* S$0.55 10.982%
First REIT Q1 : Mar-08 1.85 S$0.735 10.204%
MI-REIT Q4 : Mar-08 2.22 S$0.96 9.302%
Cambridge Q1 : Mar-08 1.588 S$0.72 8.871%
AllCo Q1 : Mar-08 1.6 S$0.855 7.509%
MapleTree Q1 : Mar-08 1.9 S$0.98 7.755%
AscottREIT Q1 : Mar-08 2.33 S$1.19 7.832%
Saizen FY08 - IPO 5.3 S$0.75 7.067%
Fortune Q1 : Mar-08 8.79 HK$4.91 7.161%
Suntec Q2: Mar-08 2.5185 S$1.64 6.176%
A-REIT Q4 : Mar-08 3.69 S$2.49 5.928%
MMP Q1 : Mar-08 1.76 S$1.17 6.051%
CDL HTrust Q1 : Mar-08 2.86 S$1.96 5.867%
FrasersCT Q2 : Mar-08 1.75 S$1.35 5.185%
PLife Q3 : Mar-08 1.62 S$1.21 5.364%
K-REIT FY08 - Rights 7.53 S$1.45 5.193%
CCT Q1 : Mar-08 2.59 S$2.27 4.590%
CapitaRChina Q1 : Mar-08 1.02* S$1.54 4.325%
CMT Q1 : Mar-08 3.48 S$3.32 4.217%
http://reitdata.blogspot.com/

Step 2, compare with shipping trust. Wow, average yield of shipping trusts is 10.59%. The Bull face pale again.

Shipping Trusts
Trust Period DPU ct Price Yield
FSL Trust Q1 : Mar-08 2.59 S$1.17 12.070%
Rickmers Q1 : Mar-08 2.14 S$1.13 10.326%
PacShipTr US$ Q1 : Mar-08 0.97 $0.41 9.463%
http://reitdata.blogspot.com/

Step 3, compare with business trust. Emm, no one covering Babcock & Brown Global?

Well, the dividend guidance of 5.20 Singapore cents per share for the first half of 2008 worked out to be 16% annualized yield (assume 5.2 cent x 2 / 64 cent current market price). The Bull, once again, pale.

Think it is not too hard for me to a make decision.

Cheers! Read more!