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Soo Kee Group IPO–How Sparkly is This “Jewel”?
Aspire, Thought Leaders | 18 August 2015
By: Mr.IPO
Articles (33) Profile

Soo Kee Group is offering 112.5m shares of which 103.5m is for placement and 9m for public offer at $0.30 each for a listing on Catalist. The IPO will close on 12pm on 18 August 2015. The market cap of the company will be $168.8m

The Company is a leading and established jeweller based in Singapore with more than 60 retail stores in Singapore and Malaysia. Its vision is to bring high quality jewellery products to customers. The milestones of the Company is listed below.

They have different brands targeted at different customers profiles and the brands in the portfolio include:

  1. Soo Kee Jewellery
  2. SK Jewellery
  3. Love & Co.

Financial Highlights

The revenue has been hovering around $129-143m for the last 3 years but the Company was able to improve its net margin in 2014 due to lower rental costs. Seems like the revenue is stagnant. Based on the Earnings Per Share (EPS) of 1.9 cents per share, the Company is being priced at 15.8x. Not exactly attractive and fairly valued as its bigger local peer Aspial (see below).

The Company intends to pay 20 percent of its net profit for FY2015 and FY2016 as dividends. Assuming EPS remains the same, the dividend will be around 1.9 x 0.2 = 0.38. That will translate into a yield of approximately 1.28 percent, which is also nothing to shout about.

Use of Proceeds

 

The Company is using the proceeds to move into a new HQ and for repayment of loan. Hopefully this can help streamline and reduce rental costs further.

What I like about the Company

  • Highly recognizable brands in Singapore with over 20 years of history
  • Experienced management team in this industry
  • Large network of 60 retail stores strategically located in prime shopping malls
  • Increasing profits for the last 3 years

Some of my concerns

  • Changing consumer patterns and challenges from offline stores
  • Limited and saturated growth in Singapore and Malaysia
  • Stagnating revenue – This is after all a consumption play. While disposable income in Singapore and Malaysia will likely rise over the coming years, the economies are facing uncertainties currently.
  • Share placement is huge at 103.5m. I understand the Company has done the majority of the placement themselves (except for the headcount) and i am not privy as to who they have placed the shares to.
  • Low Net Asset Value of only 7 cents per share versus the IPO price of 30 cents. This will create a big windfall for the founders. You can argue that it is “deserving” given that they have built up this business over 20 years, but i thought they should have left something on the table for investors by pricing it lower.
  • 80 percent of the company will still be held by the the Lim family of siblings (Lim Yong Guan, Lim Yong Sheng and Lim Liang Eng).
  • Depreciation of MYR against SGD will be detrimental to the financials and affects the buying power since diamonds are sourced from overseas. Having said that, it derives approximately 14 percent of the revenue from Malaysia.

Listed Peers Valuation – Aspial

The ratios of Aspial is listed below but looking at the first half performance of Aspial, it doesn’t seem very encouraging for the industry.

Mr IPO’s ratings

I will give this a 1 chilli rating just to support our local brand who dares to launch its IPO during the ghost month, hahaha, but given the bearish sentiments and valuation of Soo Kee, it may be a good idea to stay on the sidelines unless you are privy to who they placed out the shares to.

Happy IPO glittering.

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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