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.