A tale of two IPOs (masterskills vs. jcy)
KUALA LUMPUR: The share price charts of Masterskill Education Group Bhd and JCY International Bhd — two companies that debuted on Bursa Malaysia last year — look very much alike.
JCY, which had an initial public offering (IPO) price of RM1.60, made its debut on Bursa Malaysia on Feb 24 last year at RM1.48 per share and traded to a high of RM1.98. However, shares in JCY have since slumped to last Friday’s close of 65.5 sen. That’s down a hefty 59.1% from its IPO price, and 66.9% from its peak.
When Masterskill listed on the local exchange on May 17, it fell as low as RM3.60, below its IPO price of RM3.80 per share. Its shares subsequently rallied to a high of RM4.30 before falling sharply on the back of selling by foreign funds.
Masterskill closed at RM1.86 last Friday, down 48.3% from its IPO price and 56.7% from its all-time high.
But this is where the similarities end for the two companies.....
With earnings per share of 33 sen, the stock is trading at a historical price-to-earnings ratio
(PER) of just 5.6 times. Masterskill also has a strong balance sheet, with RM99.41 million in net cash and offers shareholders a decent dividend yield. It paid an interim dividend of seven sen on Oct 13, 2010, and is expected to announce a final dividend for the year.
....
For FY10 ended Sept 30, the company recorded net profit of RM176.39 million, some 14.9% lower than the year before, compared with the 70%-80% earnings growth analysts had expected when it went public. Based on its FY10 results and IPO price of RM1.60,
JCY’s IPO valuation would have been a hefty 18.6 times and not the 8-9 times earlier expected by the investment community.
....
The fact is JCY’s business is subject to the vagaries and cycles of the tech sector. Investing in a cyclical stock requires deeper understanding of the industry and the predicting the up and down cycles ahead of time. Masterskill, on the other hand, is in the education industry which is relatively resilient, defensive and cash generating.
http://www.theedgemalaysia.com/in-the-fina...f-two-ipos.html