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Spotting Winners in Recent IPOs

According to SGX, the recent listing of Versalink Holdings have brought the number of IPOs in the current year to 11 as well as 2 RTOs on the Catalist Board.  These 11 IPOs have a combined market capitalization of $1.8 billion.

The Catalist Board provides the avenue for fast-growing companies seeking to raise funds the capital market.  There are no quantitative entry criteria required for listing, only that the company listing on Catalist must be brought to list by approve Sponsors.  Sponsors determine the suitability of listing applicants, but what determine the success upon IPO for these companies?

I found it interesting when I scanned the performance of these companies post-IPOs.  According to SGX data as at 24 Sep 2014, with the exception of Kim Heng Offshore & Marine, Terratech Group  and SMJ, all other IPOs on Catalist Board have risen well above their IPO prices.  In fact, the top 3 winners have posted fairly good returns –      QT Vascular is up 50%, Alliance Minerals is up 52.2% while the star has certainly burst for Starburst Holdings which is up 91.9%.

2014 Catalist IPOs

IPO Price

24/9/2014

Change

% Change

Market

(cents)

(cents)

(cents)

Cap ($mln)

Starburst Holdings

31

60

29

91.94%

147.5

Alliance Mineral

23

35

12

52.17%

137.9

QT Vascular

28

42

14

50.00%

310.0

An analysis of the 12 companies which listed on Catalist in 2013 revealed that 7 companies have been winners while 5 others have seen their share prices sunk below their IPO prices.

The top 3 winners from 2013 batch were Logistics Holdings up 18.8%, ISO Team which is up 39.4% and Singapore Kitchen Equipment which is up 52.6%.

2013 Catalist IPOs

Change

% Change

Market

Cap ($mln)

Singapore Kitchen

52.60%

30.0

ISO Team

39.40%

58.2

Logistics Holdings

18.80%

48.5

Clearly, the smart investor can take a look at Catalist Board companies to pick a portfolio of winning stocks.  However, the investor should be cognizant of a few important parameters –

  1.  The market capitalization of most catalyst companies are below $200 million, especially those listed in 2013.
  2. The risk is certainly higher and thus one should incorporated higher risk premiums in calculating the fair values of these stocks.
  3. Caveat emptor that comes with such endeavours certainly ring loud and clear as there is hardly any commonality in characteristics among the winners from 2014 and 2014 Catalist Batch.  The industries that they operate in is as wide as kitchen ware to aerospace and defense.
Gabriel Yap
Gabriel Yap

Mr Gabriel Yap,CFA was an eminent stockbroker who retired from stockbroking in 2009 to devote himself to philanthropy to help the needy, poor and handicap globally. He has donated and assisted Charities Aid Foundation, Australia (CAF), a not-for-profit donor funds management business. CAF has granted over A$100 million in the past decade to needy organisations to undertake aid and charity work across the world.

Mr Yap is also Executive Chairman of GCP Global Pte Ltd, an investment firm that invest in both direct capital markets, bonds, real estate, commodities, foreign exchange and builds businesses. Mr Yap appears regularly for the TV media like Channel News Asia and Bloomberg and radio channels like FM93.8 for their various investment programs.

Previously Mr Yap has also lectured at renowned government institutions like the SEASEN Course for the Monetary Authority of Singapore and at AsianDevelopment Bank. Mr Yap has also lectured at financial institutions like the Stock Exchange of Singapore, Institute of Banking and Finance, the Institute of Certified Public Accountants, the Singapore Institute of Management and the Securities Investors Association of Singapore.

In 2010, the venerable Reader's Digest magazine created the Money Savvy column in their magazine, helmed by Mr Yap who writes on all things finance and answers questions from the magazine's subscribers.

Mr Yap presently splits his time between Melbourne, Hong Kong/China and Singapore.