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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