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.