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CMC Infocomm IPO–Buy Only When in Mood to Punt
By: Mr.IPO
Articles (33) Profile

CMC Infocomm Limited (“CMC” or the “Company”) is offering 24m New Shares at $0.25 each. There will be 21.6m placement shares and a public tranche of 2.4m shares. The IPO will end on 12pm on 11 Aug 2015 and start trading on 13 Aug 2015. The market cap is around S$38m.

The Company is a regional communications solutions and services provider with operations in Singapore, Thailand and the Philippines covering four main segments:

  1. In-Building Coverage
  2. Outdoor Construction
  3. Telecommunications Implementation
  4. Maintenance Services

Financial Performance

I am not privy to the projected performance for 2015. Assuming it makes a fully diluted EPS of around 0.36 cents, the PE ratio is still a very high double digit number > 40x.

I don’t like the fact that the revenue is overly concentrated in M1.

What I like about the Company

  • It’s a regional company with operations in higher growth countries like Thailand and Philippines and not limited to Singapore.
  • Even though it is a small listing, the majority of the proceeds (66 percent) will be used for business. The invitation expenses makes up the balance.
  • The company has finally turned around this year for the first 9 months.
  • Interesting corporate shareholders in CMC Engineering and Tee International, which resulted in 84 percent of shares being locked up.
  • Interesting appointment of Alex Siow as independent director, who used to work at Starhub

Some of my concerns

  • It is a small cap company with short operating history, having started in 2011 and been making losses for last 3 years
  • M1 is a major customer contributing to between 34-47 percent of the revenue! This makes the company heavily reliant on M1, which is also facing a tough environment in Singapore
  • Facing a competitive landscape, the company is right down the value chain with no recurring source of income
  • Seems like a business created by a father for his son…

Mr IPO ratings

I will give it a one Chilli rating – buy only if you are in the mood to punt.

From a fundamental perspective, there is really nothing to shout about. I don’t really like the fact that it is over reliant on M1 as well as the prospects of the sector. The IPO valuation is also too high. I struggle to give it a higher rating for fundamental reasons and will “run road” if I can make money. (You may want to buy Tee International instead) ^_^

Having said that, the free float of 24m is really small and can be easily taken up by friends and family of Tee International and CMC Engineering. It is not too difficult to place out the shares well.

Mr IPO is vested with 100 lots. Let’s see how it performs but he won’t overstay his welcome and will “run road” where possible.

Mr. IPO has been covering companies listing in Singapore since July 2007. His IPO blog can be found here. All views and opinions found on his blogs are personal and can be very biased.

Please click here for more information about this author.


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