ZIWO

IS THIS STOCK GOOD? I READ THE FOLLOWING AT singaporeipos blog; Ziwo Holdings Ltd is \"different\" from most recent IPOs in that the vendors are cashing out big time (in full to be exact)! The company is offering 121.512m shares consisting of 60m New shares and 61.612m Vendor shares. Ziwo is engaged in the research and development, manufacture and sale of SBR and other foamed materials. A closer look at the vendors throw out some interesting shareholders such as a Venture Capital firm, an ex-minister, a market player who recently took stakes in many small caps, a partner in an accounting firm, among others. Revenue for FY 2008 is RMB 286.8m and net profit is RMB 57.7m. The EPS for FY 2008 after accounting for service agreement and new share base is 4.60 cents. Based on the IPO price of 23.5 cents, that translate into a historical PE of 5.1x. The market cap is S$58.56m. Q1 2009 revenue stands at RMB 76.9m and net profit at RMB 22.7m. The Q1 net profit is actually very impressive and is already 40% of FY2008 full year profit. Assuming a more conservative 50% growth in profit for FY2009, the EPS for FY2009 will be 6.9 cents and with a fair value range of 4-7x PE will translate into a price of 28 cents to 48 cents. It is interesting to note that Group I investors that came in April 2008 paid 11.75c while Group II investors that came in Feb 2009 paid 8.03 cents. I guess that is because Group II investors came in at the peak of the Financial crisis and is rewarded for taking that risk. It is also interesting to note that all the pre-ipo investors are cashing out at the IPO. Do you really believe that the underwriters will allow the pre-IPO investors to \'cash out\' big time\"? It will certainly be interesting to see how the shares are being placed out at IPO and who they are placed out to. In my personal view, this is an innovative way to avoid the usual 6 to 12 months moratorium for the pre-IPO investors. By \"selling out\" at IPO and then getting friendly parties to underwrite and subscribe for the shares, the vendors effectively strike 2 birds with one stone. First, they are able to avoid moratorium on the remaining shares and second, they are able to control who the shares are placed out to and thereafter, perform some post IPO support to the shares. This stock will be interesting to watch at IPO and worth a stag, barring any major crash in the US and local market. Email this • Email the author • Subscribe to this feed • Share on Facebook Posted by 2Y Capital at Friday, October 02, 2009 Labels: 2 Chillis, China, Foam, Stirling Coleman 0 comments: Post a Comment Links to this post Create a Link Newer Post Older Post Home Subscribe to: Post Comments (Atom) Followers Google Translate Gadgets powered by Google Subscribe via email Enter your email address: Delivered by FeedBurner Subscribe in RSS reader ↑ Subscribe to Singapore IPO Feed www.singapore-ipos.blogspot.com This blog is dedicated to Companies listing on the Singapore Exchange from 07.07.07 onwards. I share my views on my personal investment fund at www.2ycapital.blogspot.com

Not so bullet-proof after all. Disappointing Q1 results with raw material costs rising faster than selling prices of Ziwo\'s products. Stock has risen about 100% since IPO (19 cents, adjusted for bonus issue) so there was not much room for disappointment. However, Q1 is only one quarter\'s results. Anyone who writes off the stock because of one quarter\'s results is suffering from short-termism. Positives ahead: Q2 could see a profit boost from the doubling of productin capacity. Also, I would expect Ziwo to clinch more orders for their bullet-proof vests and to start commercial prodn of these vests.

CIMB-GK this morning downgraded the stock to HOLD but said that Ziwo is able to raise its average selling prices and gross margins will rise. There will be more bullet-proof vests orders in Q2..... • Capacity expansion plans on track. Management has updated that its capacity expansion plans remain on track. Production capacity is expected to grow by about 30% in 2Q10 from 1Q10. Having seen strong demand for its products from Chinese automobile makers, Ziwo expects the expanded output to be mopped up by these clients. • ASPs expected to trend up while material cost remain stable. Rising material costs have resulted in a severe decline in gross margin falling in Jan and Feb 10. However, material prices have since stabilised in Mar and Apr 10, while ASPs have been rising gradually. Barring any unforeseen upswing in raw material prices, we believe that its gross margins could rise back above 30% starting from 2Q10. • New product growth remains healthy. Having secured its first contract to supply bullet-proof vest material in Mar 10, the company expects more of such contracts wins starting in 2Q10. In addition, Ziwo has been expanding its existing product market through cross selling to existing clients. An example would be the sale of its foamed EVA products to Chinese auto makers. Previously, Ziwo only sold highfoamed PE products to these clients.

DMG & Partners this morning opined: Whether or not the decline in profitability is attributable to lack of pricing power or time lag in passing on increase in costs remains to be seen. Ziwo’s profitability in the next few quarters will certainly be keenly observed to shed light on Ziwo’s ability to pass on costs. As the prices of rubber and PET chip seem likely to continue their upward trend underpinned by global economic recovery, Ziwo will be facing cost challenges ahead. We currently do not have rating on this counter.

Quite a surprise to see a press release issued during lunch break regarding the Ziwo chairman\'s purchase of 500,000 shares at 32 cents yesterday - Monday. Only $160,000 worth of buying and there is a press release - which means they are serious about the signals they are sending to the market. Can buy Ziwo or not?

Bullet proof business? 2Q results will be a telling one. Now 26 cents, quite a come down from what the chairman bought at ... 32 cents, just 4 months ago.