Revenue Group 37% Upside from Listing

We did not cover Revenue Group on our IPO Research but decided to subscribe the very last-minute realizing how fundamentally strong the company is. It was announced that the IPO offering was oversubscribed 11 times which make us feel that our chances of getting it had been lowered by a lot.

The opening price would likely be positive on opening day being an oversubscribed IPO but the story continues on asking which price to target for continuous accumulation.

A Brief History

Revenue Group is an back end electronics payment provider where they had been a part of this industry even before the rise of the word ‘Fintech’. According to their IPO Prospectus, AmBank had been their longest financial institution customer since 2004 and the list goes on opting for their services till date.

One thing for sure is that this isn’t a so called modern Internet based fly by night company. The integrity of their systems and credibility of their services plays a huge role in getting more and more customers to adopt their services.

The biggest name so far is China’s UnionPay services which opens up the market for them. China is the biggest market and with the number of Chinese people overseas, UnionPay had been the doorway to RMB based transactions and clearing overseas.

Taobao listed RevPay as one of their partners in their site.


Upcoming Development

With UnionPay services intact, this round’s IPO proceeds will lead the company to frontier markets of Cambodia and Myanmar for growth. Both very close to China and both very under-developed markets especially for online payments will provide a good prospect for Revenue Group’s growth.

Providing these services, it is best to be the market leader rather than 2nd in place because it is pretty clear that these types of companies naturally grow bigger and bigger due to economies of scale. The same infrastructure for services could be replicated easily with small modifications for each unique customer thus, economies of scale could be achieved easily.

This is why front-line services providers in the online transaction and payment industry grows bigger every year. In fact, at the end of the day, bigger actually means higher credibility similar to banks.


Consistency over the years were shown in terms of profit and loss. The company registered strong margins for gross and even after tax. The revenue growth had been smooth as well and all that proves that the business structure had been successful in Malaysia.


With a strong base locally, the company could undertake new investments into frontier markets Cambodia and Myanmar. Any kinks and bumps along the path of expansion could be buffered with their strong performance locally and possibly seize a few more customer’s in Malaysia along the way.

We think that at times, an IPO could be a marketing campaign for a company where in this case, awareness towards Revenue Group had been created through this IPO. We now know who’s behind those transaction systems. Brand image improves and being a highly known brand automatically improves their credibility. Which points back to the most important thing for provider of these services.

Indeed, the money raised could have been done through private placements where Revenue Group could still be a Sdn Bhd but the effect of listing improves the awareness of the public somewhat similar to Alibaba’s re-listing/US listing not long ago. Alibaba renewed their presence in the world and gain the awareness from the US side ditching Hong Kong listing where they delisted from there earlier.


We think that based what’s written on the prospectus, the Post-IPO market capitalization would put the company’s value at RM 82 million.


Although not the best to compare with Revenue Group, we chose Manage Pay (MPAY) as reference and the company is currently valued at RM 113 million. But sadly, MPAY isn’t a performer in terms of profitability. The firm started to make losses and eventually stressed the balance sheet acquiring retained losses as reported in the latest quarter.

Our conservative estimate puts the company’s valuation is only RM 100 million. Meaning we suggest that IPO pricing of RM 0.37 would see a RM 0.45 listing price or a gain of 20% from listing.

We wouldn’t be surprised if Revenue Group trades at a market capitalization of RM 113 million similar to MPAY’s. That would see the share price trading at RM 0.50 per piece or a 37% gain!

Listing Date

Our target buy is to collect on weakness at market capitalization lower than RM 100 million (maybe closer to RM 90 million side). On listing date, if the opening price is way up above 20%, we would take profit first and collect more when the market calms.

That strategy depends on how many shares would be allocated as well. With 11 times oversubscribe, we felt that only 30% of total subscription would be fulfilled.

Would follow up when it’s closer to listing date. Congratulations to those who subscribe, this company is rare to come by for the Malaysian market.


IPO – Mi Equipment


Growth 8/10

Still a long way to go for semiconductor especially in Penang, we expect growth to remain robust in this region. As long as MNC from around the world are still standing in Penang’s Free Industrial Zone, we would be promised with continuous growth ahead.

Growth numbers are valued this high due to the development plans by the management using the IPO proceeds. With new plants coming up, we could see better contribution in revenue generation and earnings growth.


Industry 7/10

Much similar to growth as well, the industry has great prospects moving forward. The industry continues to improve on having smaller chips which demands new machines from this company in the future.

Financials (8/10)

Solid financials to look at with double digit margins and minimum debt level. We shaved 2 points off this category due to volatility in revenue. We believe that revenue projection seems to be hard although it had showed that this is a growing company.

We have to understand that this company isn’t making products for the end user for consumers. They are making products to the middle chain suppliers to produce goods that fit into the end product. If these middle chain suppliers do not upgrade due to reasons such as the slightest slowdown in demand, it would impact this company badly.

Moat 3/10

We see no real moat in this company as there are plenty who could come in and replace them with cheaper pricing. Machines like these pretty much see high competition one price, quality and efficiency.

Proceeds 8/10

Solid use of IPO funds for building development which helps to expand capacity.

Valuations 5/10

Only an average rating on the valuations. (see conclusion)



Suggest to subscribe as the IPO mainly puts the valuations cheaper than most of its peers. The likelihood of this IPO being oversubscribed would be high due to very little amount of shares offered from this listing.

But we think that one shouldn’t weigh too much on growth plans ahead from this company. With the money raise from IPO up to the 1st production that comes out from the two new plants, it would possible take more than a year for this to happen.

Sell on 1st day of listing if possible.



IPO – Binasat Communications

It has been awhile since we found solid IPOs that are worth to subscribe. Binasat seems to be interesting with its prospectus. The attachment below contains things that are important and extracted from the prospectus so you don’t have to go through 350 pages of it.


As usual this is how we start and rate the fundamentals.


Growth 7/10

The story for growth is strong where in the pre-prospectus stage, we see the company talking about expansion into frontier markets like Myanmar, Vietnam and Laos. If you are positive on the ability of the company to growth there, then this would be a good choice.

Furthermore, the fibre optic segment is still something that many have yet to tap on for the South East Asian region. We forecast that this would be the difference maker in the future comparing to how much the company relies on satellites for its current revenue.

Industry 7/10

Unlike telco service providers that we dislike to invest, this seems like a a telco company but the different is totally different from the likes of Maxis or Digi phone line providers. Binasat is more towards a service provider for telco companies.

Maxis in particular uses the satellite services at the current moment where the services includes satellite.

Extracted from The Sun

Domestically, the group claims to have a 57% market share for maintaining satellite ground stations located at petrol stations and 64% market share for O&M for all satellite ground stations.

Financials 8/10

Indeed very solid margins and we can only hope that the company continues to perform so. The consistency can be seen over the years not only the year prior to IPO. Basically we do not sense any form of beautifying the income statement just for the current IPO.

Moat 8/10

Going back to the extract above, it stated that they have 57% market share for ground stations. We believe this form of moat is high and its customer base has one of Malaysia’s largest telco operators which makes it hard for other opponents to enter the market.

Proceeds 8/10

Top class proceeds where we always like to see. Most of the money goes into investing in assets that provide a continuity to the business and long term gains. Only 27% of the proceeds would be used on working capital. It is very unlikely that this would be used to pare down debt since the amount of borrowing merely hits only 28% debt to equity.

Valuations 5/10

Although all the other fundamental numbers are more than satisfactory, we felt that the stock is listed at the more expensive end of things. You might question paying only PE of 11 is quite low seemingly the KLCI PE is somewhat close to 16. As a matter of fact, we have to factor in that IPO valuation needs to be much lower in term of premium to buffer our investment.

We have ensure that there is a likelihood of a quick flip on the first day or being really cheaply priced for long term holding in the case where it doesn’t boom in the first day. We felt that a PE of roughly below 9 is much better to get a higher valuation score.


Average valuations suggest that we do not go all out on the subscription, we suggest that you subscribe 70% of what you are used to for this issue. We felt that on the first day of listing, it might spark a 8-9% gain. Considering as well new year and many investors are seeking new things to put money into.


Follow Up on Lotte Chemical Titan IPO

If you’ve subscribed to the Lotte Chemical Titan IPO as a retail investor, I would say congratulation as all your subscription had been approved due to under-subscription. In most cases, under-subscription equals death by humiliation but this time around it’s all forgiven.

Jokes aside, 11 July 2017 on opening we should see the prevailing price for LCTITAN and anything below RM 6.50 is institution’s loss. We see a few probably scenarios on 1st day of listing.

Below RM 6.50

Obviously this meant that you should start preparing your form and send it out right away to avoid probably delays. The risk falls upon you if you would like to wait and hope that prices would rebound higher and you could make a profit.

Remember that once you’ve sent out the request form, you have to abide with this rule

l/We confirm that l/we own such Relevant Shares as at the Record Date and l/we will continue to own such Relevant Shares until the day such Relevant Shares are transferred to the Company’s CDS account (pursuant to paragraph 3 below).”

Make sure you have shares in your account equivalent to what you’ve subscribed to. No partial share amounts, just remember that.

Above RM 6.50

Congrats, I need not elaborate on this. But you might want to factor in transaction cost if price is merely a cent higher at RM6.51.

Stupendous amount of buyer at RM 6.50

We advise investors to do a cost analysis on their holdings. If you hold a small number of shares and your transaction cost isn’t huge. We recommend that you sell it to remove the risk of letters going missing and delayed cash return having to wait till Aug 2017. If you’re granted 100,000 shares, I guess it’s better to courier the document via PosLaju or any reputable couriers.

Meanwhile, don’t be scared if you’re successful in getting this under subscribed stock. Relax and have a good weekend, check your holdings if it’s correct in the morning of 11th July 2017.

Form Attachment

Download Here




IPO – Lotte Chemical Titan

Click to download the IPO extract done for your ease!



Growth – 6

We rate growth at 6 due to its operations in Indonesia that would likely see major gains due to the increase in demand for olefins. From the IPO prospectus, it is expected that Indonesia would see double digit CAGR for all major olefins.


Nevertheless, Malaysian operations should remain normal but with the unknown exception of the effects from a full scale RAPID Pengerang Project.

Industry – 5

We could just rate industry a mere average since prices of feed had declined with crude but the industry still do not see a huge gain in terms of profit. A simpler way to understand is that olefins are not specifically ‘branded’ which makes it a commodity in the end rather than a good.

Financials – 8

Top notch financials with little to no debt and currently increasing in margin versus the other major names in this field.


Moat – 4

As stated in industry, the products offering do not have a specific brand to it. The company’s business does not differ from any of its competitors in the region.

Proceeds – 10

We rated a perfect 10 for proceeds as you can see that the funds raised would be fully utilize in business expansion which in the end turns into a new stream of revenue from the Indonesian side and de-bottle necking plans in place to increase the efficiency of the plants in Malaysia. One of the best IPO proceeds we are rated which reflects what raising funds should mean rather than settling debt obligation.

Valuation – 7

We rate valuations slightly better than average since at RM8.00 per share it should trade cheaper than its listed peers like Petronas Chemicals and PT Chanda Asri. At the moment Petronas Chemicals trades at 16.02 and PT Chanda Asri at 16.59 versus the expected PE of Lotte Chemical Titan at 15.


We recommend you to subscribe to this IPO due to good business structure, plan and good utilization of IPO proceeds. Growth should likely be healthy for Indonesia and the big chunk of money (around RM4 billion) would be utilized in the development of petrochemical plants over there.

Furthermore, we do not see any downside in first day of trade due to high institution allocation. Over 92% of the allocated shares are meant for institution which we would likely see a lock in period of 1 year.

IPO – Eversafe Rubber


Overall, we are satisfied with this company and the only thing worrying is the industry which is retreading of tyres. Obviously retreading is something that isn’t preferred by user but are still widely practiced especially on heavy duty tyres.

We feel that financials, moat and valuations would get an above average rating of 6 which is isn’t quite bad in our books. Being niche as it is, it does pay in one’s investment. The proceeds from IPO would be fully utilized for the business itself and that is why we rated it a solid 10.

As good as it gets, we have decided to recommend this IPO for subscription and highly recommending investors to buy if there’s any pull back in the price. We doubt that price on the first day of trading would spike but nevertheless it shouldn’t weaken by too much.


IPO – Eco World International

Over RM12.96 billion worth of Gross Development Value and a huge support from institutionals side with Guocoland securing 27% stake in this IPO. These heading creates a massive WOW! among crowds and truly marketing itself with all the hyped up headlines brewing interest and maintaining it as this is one of Malaysia’s biggest and most anticipated IPO.

Eco World International (EWI) would become a proxy for Malaysian investors to gain exposure in overseas housing markets. The RM12.9 billion worth of GDV accounts for 3 projects in the United Kingdom and one in Australia.

We are not interested in the project location as we believe that it likely to be out of investor’s control even if they plan to sell it off half way through. But we took a glimpse on the locations involved and rated average for it the reason being nothing much can go wrong with it. You can save your time to look up those locations unless you are buying a property there.

Let’s analyze the ratings given:


Growth (7) – We think that growth potential is huge with project value as high as RM12.9 billion. I guess that’s a very big order book or 5 times the expected market cap of RM2.58 billion post listing that would be raked in by this IPO at RM1.20 per share. The average Malaysian property developers has a GDV to market cap sits around 2.5 to 3.5 times.

Valuations (6) – We couldn’t derive the PE that we are expecting but a rough estimation from GDV of RM12 billion can be spread out in the next 5 years adding in a margin of 11% (referring to local minus 5% since EWI would likely have problems on foreign land). We come up with our projection with the PE of 9.23 at the listing price of RM1.20. But according to the timeline of the project development, we could only see these numbers later in FY2018.

Note that we haven’t include dilution from warrants that would be given out after a bonus issue. The valuations would definitely be more expensive with the exercising of warrants in the future.

Proceeds (3) – This is the part that’s bothering us every single time an IPO goes on air. We really dislike to invest in something that uses our money to pay debt. 52.9% of the IPO proceeds would be used to pay debt which makes it felt as if we are being used as bailout plan when a company gets loaded with a little too much debt. Obviously you can take a contradictory view where investors who want a piece of their landbank overseas would have to literally ‘share the cost’ of the landbank acquired earlier through debt.


Moat (5) – Neutral on EWI’s moat since everything looks average in our books. The moat isn’t that deep since it’s a developer but already owning the land for development in those location makes it look better on paper.

Financials (2) – Still a loss making company with accumulated losses of RM200 million in the balance sheet. Around RM900 million worth of borrowings are classified under current liabilities which meant that these liabilities need to be settled within a year or to refinance those borrowings with a longer tenure. This pretty much explains why so much of its IPO proceeds goes into debt repayment.

Industry (3) – Properties around the world might see slower than expected growth rates when increasing interest rates begin to loom. Perhaps the United Kingdom properties might fare better with historical low British Pounds that would likely attract foreign buyers into that market. Nevertheless, we still rate the industry a low 3 seeing that there’s a limited room to grow coupling with intense competition moving forward.


We recommend you to subscribe only to flip it over on the first day of trading expecting to register a huge gain in price with all the hype created. If you plan to hold the stock long term, I guess it would be more suitable to enter when the market is expecting good earnings for quarters ahead. That’s likely FY2018 or so since much of the completion comes in after 2019!

We felt that with an issue price of RM1.20 per share, we might see a 10-15% gain on the first day of trading which is a great opportunity for you to unload. The fact that this counter seems to be treated like a ‘superstar’ IPO and the high percentage of institution and director holdings lowers the downside risk on first day trading for this stock.

See Our Extract from the IPO Prospectus


IPO – Serba Dinamik Holdings

A good company but tough market for them to operate.


Well as we all know, the oil and gas sector in Malaysia as well as overseas such a Middle East has already matured with huge players having a commanding position in every way possible from services to equipment provision. We rated moat a low 3 since the moat factor isn’t quite wide for this company at the moment.

With oil coming back up, it is possible that it would gain momentum but we felt that the momentum of increase in oil price has to be huge than what it is now for them to feel the spillover effect. That explain why we rated an average 5 in terms of growth and slightly below average for the whole oil and gas equipment industry.

Financials and valuations remained the solid point where valuations are quite low and the company is growing year on year with its revenue. But is this a case of a revenue growth ending? We suggest that since CAPEX in most oil and gas companies were slashed, it might be that their revenue growth had peaked in 2015. We remain cautious for future outlook of this company since it is still early in the oil price rebound.

Proceeds from IPO were rated an average as well with a health mix of expansion and closing up some debt holes. The debt to equity of 80% is a little too high and it is good to restructure debt since a good restructuring could improve the ability to handle higher debt exposure

We do not think that this stock is could rally non stop together with current energy prices since it doesn’t have a direct impact from oil price volatility. We expect the stock to trade higher than the offer price for its valuation and momentum coming in from a rebounding energy market. The stock pricing would likely remain stable for the whole lock in period since high percentages of institutionals are holding it.

Subscribe, Flip or Hold with Caution

See the Prospectus extract in our report below


IPO – KIP Reit

The best part is the proceeds for its IPO this round. It will fully fund the newly acquired properties and that is why we rated it an 8.

Growth and valuation sits high in our ratings as well since a REIT focuses on rental yield and it should have a steady growth in time. The current offer price of RM1.00 derives that the REIT is valued a the cheaper end against its competitors.

Financials are rated average but the REIT could still load itself with high levels of debt since its debt to equity levels are currently at 17%. Most REITs can leverage up to 100% of equity if the yield is good for a newly acquired property. Of course it may be hard to match a high yielding property with a cheaper borrowing.

Moat and industry rated lowest since being in retail REIT, the stickiness of its tenants would highly depend on the health of the economy and spending power. Moreover, KIP retail outlets are not what we consider ‘IGB REIT like’ properties and the appeal of its properties might degrade faster compared to others.

REIT itself might be facing a hard time when interest rates begin to rise again. With Fed rising rates, we fear that Bank Negara might follow to maintain the ringgit strength.

Basically, there’s zero to no moat for KIP REIT since its just like another other retail REIT.

We still recommend you to subscribe as we felt that this counter would have a good debut on its first trading day due to its prospects.

See the Report Below


IPO – Matang Berhad


First off, we look at this company like any other plantation company in Malaysia and it scores a solid 7 on financials with margins that are on par within the league of plantation companies in Malaysia.

Next, a solid 6 for industry since most of the company’s assets are matured and ready to produce fruit. In fact, the Fresh Fruit Bunch (FFB) production might be at the peak this very moment which is intriguing for investors who love to see profit in the next couple of years.

Average rating on growth since it doesn’t differentiates itself from any other plantation company which also explains our rating of 3 only moat. Its only moat consist of the direct buyer of FFB Lenga which is close to the company’s estate.

You might wonder why we have a higher than average rating on the IPO proceeds. Since replanting exercise only takes up 1.5% of the IPO proceeds, does this mean that we will not see much growth ahead? Not quite…

But first we go to the largest portion (70%) which is to finance general working capital. The definition for working capital the company’s net current assets. A company might be paying off their current liabilities with IPO money which is really a crime since IPO proceeds should be used to grow and not to cover up debt holes.

But for Matang Berhad, the current liabilities sit at less than RM 1 million which meant that there aren’t that many debt holes to fill with the IPO proceeds. This meant that the IPO proceeds will likely go to current assets which includes cash for investment purpose or even buying more agriculture produce from other parties just to keep their main buyer stocked up.

Overall we value this IPO an above average rating but remember this is likely going to be a dividend yielder in the future than a highly active growth company.

Click for Extracts from Prospectus