IPO

Friday, June 16, 2017

Lotte Chemical Titan HOlding Berhad

IPO (Rating 3.0 star out of 5.0)
Copyright@http://lchipo.blogspot.com/

Date
Open to apply: 16/06/2017
Close to apply: 28/06/2017
Listing date: 11/07/2017

Share Capital
Market Cap: RM7.970 bil
Public Issue: 740.483 mil shares (IPO: 55.783 mil)
Enlarged Issued Shares: 2.468 bil shares

Business
Polypropylene (23.1%), Polyethylene Msia (34.9%), Polyethylene Indo (21.7%)

Geo Revenue
M'sia: 38.7%
Indonesia: 28.5%
China: 11.3%
Southeast Asia: 9.7%
Others: 11.8%

Major Customer
2016: top ten customer contribute revenue 23%

Fundamental
Market: Main Market
Price: RM8.00
EPS: RM0.53 (use total shares after IPO, in prospectus is RM0.7613 is before IPO)
P/E: 15
Cash & fixed deposit after IPO: RM0.42 per shares
NA after IPO: RM6.12
Debt ratio after IPO:  0.091 (Debt: 1.371 bil, Non-Current Asset: 11.749 bil, Current asset: 3.361 bil)
Dividend policy: 50% from nett profit
ROE: Before IPO 16.5%, after IPO 9.6%

Financial 
Trade Receivable: 30-60 days
Trade payable: 25.5 days
Bad Debt: RM1.7mil (0.4% from total trade receivable) not collected after 90days

Past Financial Proformance (Revenue)
2016: RM8.136 bil (eps: 0.7613)
2015: RM8.147 bil (eps: 0.3549)
2014: RM8.611 bil (eps: -0.0111)

Net Profit Margin
2016: 16.2%
2015: 7.5%
2014: 0.2%

After IPO Sharesholding
Lotte Chimecal Corporation: 67.8%

Director Remuneration (from gross profit 2016)
Tan Sri Dato' Abdul Rahman bin Mamat: RM250k-RM300k
Lee Dong Woo: RM950k-RM1mil
Lee Kwan Ho: RM1.15mil-RM1.2mil
Tan Sri Datuk (Dr.) Rafiah: RM150k-RM200k
Ang Ah Leck: RM150k-RM200k
Total director remuneration from gross profit:0.13% - 0.15%

Use of fund
Funding for project: 97.42% (5.771 bil)
Lising expenses: 2.58%

Conclusion
Good thing is:
1. Fundamental of company is strong.
2. Have very minimum debt compare asset.
3. Trade receivable & payable is in healthy level.
4. Director fee consider acceptable.
5. 97.42% of IPO fund use to expand bunisess.

The bad things:
1. Revenue doesn't growth for past 3 year, the EPS growth mainly from cost deduction.
2. Board of director have very minimum of shares in the company. Company shares price perform or not doesn't have much effect to director.
3. Profit margin increase mainly from low crude oil price. In case crude oil price increase the company cost is expected to increase.
4. PE15 is consider near to country PE. Consider as fair but not discount.
5. PE almost near to main competitor PCHEM. ROE% is PCHEM slighty better.

Conclusions
Is above average IPO.  heavy expand using the IPO fund will see return after 3 years. Good for investment period more than 3 years.

IPO Price: RM8.00
Good time: RM9.01 (PE17)
Bad time: RM5.30 (PE10)

Company website: http://www.lottechem.my/