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Sri Lanka Equity Forum » Stock Market Talk » Access Engineering IPO - Research

Access Engineering IPO - Research

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1Access Engineering IPO - Research Empty Access Engineering IPO - Research on Wed Feb 29, 2012 8:04 am

Quibit

Quibit
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

2Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 8:07 am

Chanuque

Chanuque
Manager - Equity Analytics
Manager - Equity Analytics
Directors' and Employees' holding of AEL ( Access ) is about 80% and their cost is LKR 5.00 per share. IPO offers you at LKR 25.00 per share, means 500% more of the principal stake cost. What will happen, is that there will be an enormous selling pressure since the day 1 of trading as the AEL employees are going to take the opportunity to dispose their holdings to make profits. Price will decrease definitely and you can buy AEL from the market less than the introductory offer that of LKR 25 ( Predicted price when it settled in the market : between LKR 15 and LKR 19 ) .. !

3Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 10:23 am

manula


Vice President - Equity Analytics
Vice President - Equity Analytics
Better to buy from the secondary market... all the IPO prices are coming down and here we have millions of free share of AEL working staff also waiting to come to the market..

4Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 10:54 am

wiser

wiser
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
but employee can't sell, since one year locking period applied for them. anyway it seems this is a good company otherwise who gave share for employees free. They are treating to employees in better way. So future seems good.

But I'll not subscribe this , wait for secondary market.

5Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 11:05 am

wiki


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Thanks for the research report
I will wait to buy in secondary market.. nothing to loose

6Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 11:17 am

WildBear


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I,m sure once the employee's start to dispose we will be able to buy this below 1.00 rupee Razz [quote]

7Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 11:33 am

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
This is an awful IPO. it's coming to the market with a PE of 25. there is no way they can justify that valuation

8Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 1:09 pm

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Agree with most above comments.
If someone does not like to apply for this IPO, then all he/she wants to do is just ignore..!!
It's pointless to blame the authorities or a 3rd party later.
Overall its a really good point to see more n more IPOs are coming to the market.

9Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 1:11 pm

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
I suppose one thing working for access are the favors mahinda owes them

10Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 3:00 pm

sapumal


Vice President - Equity Analytics
Vice President - Equity Analytics
SEC must ban these kind of IPOs
If IPO price is 25 and if it will hit 12 in the first day , it have a very bad impact on ASI

11Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 3:05 pm

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@mono wrote:This is an awful IPO. it's coming to the market with a PE of 25. there is no way they can justify that valuation

I do agree with you.
But in CSE out of 270+ companies, how many companies - we can justify the current market price?
As UKBoy told if we are not interested not to participate in the IPO.

12Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 3:37 pm

econ

econ
Global Moderator
please do not subscribe these kind of IPOs.

13Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 3:45 pm

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
@Redbulls wrote:
@mono wrote:This is an awful IPO. it's coming to the market with a PE of 25. there is no way they can justify that valuation

I do agree with you.
But in CSE out of 270+ companies, how many companies - we can justify the current market price?
As UKBoy told if we are not interested not to participate in the IPO.

So, you don't hold any shares?

14Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 5:51 pm

snandasiri

snandasiri
Manager - Equity Analytics
Manager - Equity Analytics
@mono wrote:This is an awful IPO. it's coming to the market with a PE of 25. there is no way they can justify that valuation
I agree with you. A procedure must be introduced to calculate a share price of a IPO considering all factors.

15Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Wed Feb 29, 2012 5:54 pm

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
@mono wrote:
@Redbulls wrote:
@mono wrote:This is an awful IPO. it's coming to the market with a PE of 25. there is no way they can justify that valuation

I do agree with you.
But in CSE out of 270+ companies, how many companies - we can justify the current market price?
As UKBoy told if we are not interested not to participate in the IPO.

So, you don't hold any shares?

My question is how many?
That does not mean all are rubbish.
What I hold is not an issue.

16Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Thu Mar 01, 2012 2:50 pm

lamaya


Equity Analytic
Equity Analytic
check the conclusion of the research report done by Asia Wealth Management....
"It is noted that based on the financial analysis and the forecast we have done, AEL is clearly a fundamentally strong counter that we could recommend to “SUBSCRIBE”. However, it is fair to bring to notice the possibility of gifted shares to employees (Please refer to slide - Capital Structure) selling in the secondary market subsequent to initial trading. This scenario could bring downward pressure on the share price. Albeit, it is reiterated that
based on financial analysis and forecast , AEL is a fundamentally strong counter."

I think its very unbiased openion

17Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Thu Mar 01, 2012 4:07 pm

greedy

greedy
Manager - Equity Analytics
Manager - Equity Analytics

If one carefully notices, the purpose of this IPO is to increase the marketability of the 980Mn shares that have already been issued. And the main purpose is not to raise funds through the issue of 20Mn shares to the public. 980 million shares vs 20million shares. Cant they raise this Rs.500Mn through another private placement??

This is new way of raising funds now. First Bonus issues, Sub divisions, private placement and later issue of a small number of shares to give an opportunity to sell shares.

one more point to note that 600 million shares have been issued by way of bonus issue during 2011. The company did not have huge reserves to do the capitalization at the same rate of PP or IPO. Therefore, the rate of capitalization Rs.5 after taking into account of subdivision. if the capitalization was done at the same rate of Private Placement or IPO i.e at Rs.25, they could have issued only 120 millions shares as bonus issue not 600 million shares.

Price to Book Value

Book value per share before this IPO is ......

Net asset value as of 31/03/2011 4,344mn
Issue of shares after 31/03/2011 4,500mn
Total book value ignoring value
creation after 31/03/2011 8,844mn

Book Value per share Rs.9.02 (Rs.8,844mn/980mn shares)

Price to book value 2.77 times (Rs.25/9.02)


Price Earnings Ratio

Profit to equity Holders of the Parent Rs.962mn
Number of shares before PP 800 mn shares
EPS Rs.1.20 (Rs.962mn/800mn shares)
Price Earnings Ratio 20.83 times (Rs25.00/1.20)


However, if you notice 31/03/2011 accounts, there is a one off gain (Most probably one off/irregular) of Net Gain from Fair Value of Investment Property amounting to Rs.291mn.... If we exclude this from the net profit..

Profit to equity Holders of the Parent Rs.962mn
Less: Net Gain from Fair Value of Investment Property Rs.291mn
Profit excluding irregular profits Rs.671mn
Number of shares before PP 800 mn shares
EPS Rs.0.84 (Rs.671mn/800mn shares)
Price Earnings Ratio 29.76 times (Rs25.00/0.84)

(This one of gain has been ignored by the research person)

My reply does not constitute a subscribe/not to subscribe recommendation. It is up to the investors to make a informed decision. I'm have not commented on the Future prospects of the company that matters most. Few lucrative contracts can huge profits to the company. However, as it stands now, the price does not seem to be so attractive to me considering the selling pressure that comes in different dates from PP and employee shares.

18Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Thu Mar 01, 2012 4:19 pm

anubis


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Let's redefine the term "IPO" - An opportunity for a private company's shareholders to convert their shares to money.

lol!

19Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Thu Mar 01, 2012 6:41 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@greedy wrote:

(This one of gain has been ignored by the research person)


Was it accounted in for most of the IPO research docs from broker up to now?

'tis purposely done to bring a valuation attractive IMO...

Finally this is also a mess..

20Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Thu Mar 01, 2012 10:14 pm

greedy

greedy
Manager - Equity Analytics
Manager - Equity Analytics
@smallville wrote:
@greedy wrote:

(This one of gain has been ignored by the research person)


Was it accounted in for most of the IPO research docs from broker up to now?

'tis purposely done to bring a valuation attractive IMO...

Finally this is also a mess..

I don't read much IPO research documents from broker firms but glanced through this one. The best practice is to take off one off gains and "Normalise" earnings in calculating P/E ratios. As per the research document, P/E ratio is 20.37 based on 2011 earnings. However, if we eliminate this irregular gain, P/E ratio would be 29 times.

refer page number 109 in the prospectus (4th line item in the income statement).


21Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Sat Mar 03, 2012 1:02 pm

greedy

greedy
Manager - Equity Analytics
Manager - Equity Analytics
How the new rule on IPO is going to affect Access....?

Refer this post...http://forum.srilankaequity.com/t16562-amendments-to-listing-requirements#108425

1) Shares held by promoters and all other shareholders prior to an offering to the public shall be locked-in for a period of 09 monthsths from the date of listing of shares on the CSE

2) A public company which has allotted shares within a period of one year prior to the date of the initial application, all such shares shall be locked-in for a period of 12 months from the date of listing on the CSE.


It is good to see that existing share holders also have a lock-in period as opposed to previous rule which applies to shares allotted on Private Placement.

Is this new rule applicable after 1 April 2012? If that is the case and Access get a listing date before this date, the new rule will not be applicable to Acccess.

Any views on this?

22Access Engineering IPO - Research Empty Re: Access Engineering IPO - Research on Sun Mar 04, 2012 10:46 pm

snandasiri

snandasiri
Manager - Equity Analytics
Manager - Equity Analytics

23Access Engineering IPO - Research Empty Brokers recommend buy on Mon Mar 05, 2012 2:37 am

sriranga

sriranga
Co-Admin
Most market analysts tip the Rs. 500 million Initial Public Offering (IPO) of Access Engineering Ltd., which officially opens on Tuesday 6 March, to be comfortably fully oversubscribed, whilst several brokers too have recommended it.

Lanka Securities, which recommended the Access Engineering IPO as Subscribe, said the forecasted EPS for FY12E is Rs. 1.7 and BVPS stood at Rs. 11.7. Accordingly, the forward PER and PBV for FY12E are 15.0x and 2.1x respectively (at IPO price of Rs. 25.0).

Heavy construction sector is currently trading at a PER of 10.2x, while close peers such as Colombo Dockyard and MTD Walkers are trading at PERs of 9.3x and 14.3x respectively.

Lanka Securities also said based on a complete valuation carried out using discounted free cash flow, the calculated total equity value for the group is Rs. 27.7 billion at the end of FY12E.

Accordingly, the derived value per share of AEL is Rs. 27.70, an upside capital gain of 11.0% over the issue price of Rs. 25.00. “Hence, for a rational investor with a long-term perspective, AEL’s IPO price is justifiable and we recommend Subscribe,” Lanka Securities said.

It is forecasting a net profit of Rs. 1.7 billion (+43.0%) and Rs. 2.1 billion (+25.2%) for FY12E and FY13E respectively. The increase in net profit is mainly driven by the accelerated infrastructure development activities in the country.

The revenue is anticipated to grow at a rate of 76.9% and 37.3% in the next two years supported by the booming construction industry. The construction industry which saw a sluggish activity in recent years is now facing a 9.3% (in 2010) upturn with the mega infrastructure projects undertaken by both government and private sector.

LSL said key risk factors would be possible inflationary economic conditions (e.g. rupee devaluation, increasing interest rates, increasing inflation, etc.) and it may affect the construction cost to increase over the period.

Given AEL’s sound business relationships and impressive track record, Arrenga Capital expects the Group to thrive on future prospects in the construction industry in line with infrastructure development in the country.

“Hence, we expect AEL to record net earnings of Rs. 1.8 billion for FY13E and Rs. 2.6 billion for FY14 featuring a PER of 14.0X and 9.7X respectively,” it said.

The counter, which is in a high growth industry, is offered above market valuations at a price of Rs. 25 per share on FY13E earnings (4Q Trailing Market PER of 11.0X), Arrenga added.

Asia Wealth Management forecast AEL earnings to be Rs. 1.58 billion for FY12E whilst FY13E earnings would remain at Rs. 1.99 billion.

“We expect the company to perform much better with the upcoming construction projects in the pipeline coupled with significant potential in the high-geared construction industry in the country,” Asia Wealth said.
AEL on a forecasted net profit of Rs. 1.58 billion for FY12E, accounts to a PE multiple of 15.8X. Furthermore Asia expects 12.5X and 9.7X on its FY13E and FY14 earnings respectively.

In addition the counter currently trades on a PBV of 5.5X, which we anticipate would improve to 2.1X by the end of FY12E. As opposed to the Construction sector PE of 10.6X and PBV of 1.6X.

“It is noted that based on the financial analysis and the forecast we have done, AEL is clearly a fundamentally strong counter that we could recommend to “SUBSCRIBE”,” Asia Wealth Management said.

However, the broking firm said if gifted shares to employees are sold in the secondary market subsequent to initial trading there could be downward pressure on the share price.

Access Engineering, which made its foray into the motor business with a Rs. 846 million acquisition of a 60% stake in Sathosa Motors, is offering 20 million voting shares at Rs. 25 each.
http://www.ft.lk/2012/03/05/brokers-recommend-buy/#more-75080

http://sharemarket-srilanka.blogspot.co.uk/

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