What will happen to Access Engineering IPO

heard only 20 million shares and do u think is it worth to buy for rupees 25

thanks in advance

http://forum.srilankaequity.com/t16054-access-engineering-ipo-is-any-one-interested?highlight=access

By Dururthu Edirimuni Chandrasekera
Access Engineering Limited (AEL), having launched its Rs. 500 million Initial Public Offering (IPO) on Thursday, will be getting into property development in and around Colombo, officials said.
Sumal Perera, Chairman AEL told a group of analysts that the company has identified land and will be eyeing property development backed by the stimulated growth in the construction sector. "Our profit is from organic growth and we will continue to do so," Mr. Perera said.

AEL, which is one of the country's leading construction enterprises, will offer investors a different investment option, according to Mr. Perera. The IPO is to partly finance the working capital requirements of a housing project to the value of Rs. 3 billion undertaken by the company on behalf of UDA. In June 2011, AEL completed a share issue of Rs. 4.5 billion by placing 180 million shares at an issue price of Rs. 25 each. This is an 18% stake of the company. The balance 2% will be issued at a share issue price of Rs. 25 per share.

He added that now the company is developing large and complex infrastructure development projects utilizing innovative and state-of-the-art technological solutions in all its construction projects.
To date the company has been involved in a diverse range of construction and infrastructure projects in varied sectors such as roads and highways, bridges and flyovers, water and waste management, harbours and marine work, dredging and reclamation, telecommunication, irrigation and land drainage, piling and environment and waste management.
http://forum.srilankaequity.com/t16329-what-will-happen-to-access-engineering-ipo

This may be a another failed one

This time I am not going to beleive the promoters future growth estimates because they mislead us in colution with the IPO companies in previous IPOs. Be carefull guys & read the prospectus thoroughly & make your decision.

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 for a bottom price between LKR 15 and LKR 20 .. !

Small recap;

No. of IPO shares - 20 million ordinary shares
price - Rs. 25
subscription open date - 6th of March
Min qty to be applied - 400 Shares
Employee shares - 120 million ordinary shares (3 Billion of worth)

Private Placement shares - 180 million ordinary shares were sold @ 25/- each raising 4.5 Billion (18% holding of the company was sold thru PP)

These private shares were given at same price as IPO, and are locked until 11th Jun 2012.

Major Share Holders after PP = John Keells Holdings, Carsons Group, MAS Holdings, Vallibel One, Associated Electricals Company, Hirdramani Group

Business Line = Engaged in the business of providing civil engineering services in Sri Lanka and offers turnkey engineering solutions including design, procurement, construction and commissioning of engineering projects.

Future Projects in brief : According to Sumal Perera, the owner, the company has recieved construction contracts worth 30Billion rupees and 80% of those were state projects depend on foreign aids.

Chanuque -> PP shares are in a lock but not sure of Employee shares.. Can happen what u said But they got the shares @ 25/- also so I wonder what will happen as 20+120 = 140 Mil shares to be on transactions..

smallville wrote:Small recap;

No. of IPO shares - 20 million ordinary shares
price - Rs. 25
subscription open date - 6th of March
Min qty to be applied - 400 Shares
Employee shares - 120 million ordinary shares (3 Billion of worth)

Private Placement shares - 180 million ordinary shares were sold @ 25/- each raising 4.5 Billion (18% holding of the company was sold thru PP)

These private shares were given at same price as IPO, and are locked until 11th Jun 2012.

Major Share Holders after PP = John Keells Holdings, Carsons Group, MAS Holdings, Vallibel One, Associated Electricals Company, Hirdramani Group

Business Line = Engaged in the business of providing civil engineering services in Sri Lanka and offers turnkey engineering solutions including design, procurement, construction and commissioning of engineering projects.

Future Projects in brief : According to Sumal Perera, the owner, the company has recieved construction contracts worth 30Billion rupees and 80% of those were state projects depend on foreign aids.

Chanuque -> PP shares are in a lock but not sure of Employee shares.. Can happen what u said But they got the shares @ 25/- also so I wonder what will happen as 20+120 = 140 Mil shares to be on transactions..

If you carefully notice, 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)


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.

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

We should consider the meaning of the greedy's post;
"If you carefully notice, the purpose of this IPO is to increase the marketability of the 980Mn shares that have already been issued. "

What this means?

The whole idea behind the IPO is to sell shares already issues thru PPs or free to the max bid on opening day and thereafter..
So the chance is; they will stop at nothing to sell it even at 10 or so {Once u get it free even Rs. 1/- is profit to u, aint it?}

So all these broker firms might be thinking of the big picture in a years time, all the valuations, anticipated revenue and business growth could be even achievable but what matters most is now the profit making ability of an entity but the no .of shares that can float in the market.. The more it has, the lesser the interest be..

So do u honestly think you can sell more than @26-27 range unless in an extreme lucky condition?

i'm not going to argue over this ipo . they may or most probably push it to over Rs 30 in the first day . all i can say is GB to all the buyers who going to buy this thing from the top.

Good company but Overvalued IPO . Some background issues disucssed needs to be taken to account.

For long term I will not touch this until the offer price meets the earnigns value. Maybe there can be short term trading opportunities with this.

This is a bullshit share.Their main purpose is to sell the shares to retailers at higher prices & exit.7-8 L also possible very first day...

My dear friend visit this
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Don't feel sad mate! first day it can go up before coming down.