Mr IPO: What I like about ADVANCER GLOBAL

Advancer Global has done well since its listing on the Catalist board on 11 July 2016 , vindicating the views of Mr IPO's which were published on his blog before the listing.

♦ What I like about the Company

♦ The businesses are stable, recurring and recession-proof as you will require these services in good or bad times. There is also growing demand for such facilities management services due to the increasing number of condominiums in Singapore

advancerboss8.16 L-R: CEO Gary Chin, executive chairman Desmond Chin, CFO Michelle Li. Photo: SGX♦ The businesses are aligned with one another and provide cross synergies. For example, if the Company provides security guards to a condominium, they can also tender for the cleaning services.

♦ Nation Employment (with Xiang Yun as the spokesperson) is probably the most "well known" asset and actually earns a "royalty fee" for its use in Malaysia and PRC!

♦  The Company has been paying dividends regularly since FY2013 and has agreed to pay 50% of its profit as dividends for the next 3 financial years. This helps provide strong alignment of interest between management and new investors.

♦  Simple and easy to understand business structure with no pre-IPO investors trying to cash out.

♦  While business is highly specialized and catered to the Singapore market, scalability outside Singapore is probably limited. However, the Company has demonstrated that the "Nation" brand is licensable outside Singapore.

Some of my concerns

♦ The auditors, Mazars LLP, is a non "big 4" audit firm

♦ The supply of FDWs is always subject to changing laws, regulations and policies in both Singapore and the countries which the foreign labour originate

Scalability outside Singapore

Peer valuation

It is definitely not easy to find a comparable since Nation has one of the biggest market share locally in FDWs. The next closest peer in the security space is Secura Limited (see my post here). The Secura Group is currently trading at 18.8x PER. Assuming a more conservative EPS of 2.28 cents and using a fair value range of 10-12x PE, it will imply a fair value of 23 cents to 28 cents. Assuming EPS increases to 2.772 Singapore cents, the fair value range will be 28 cents to 33 cents.

Conclusion

I quite like Advancer for the following reasons:

♦ Attractive entry valuation of 8x PE

♦ Dividend yield of more than 5%

♦ Stable recurring income

♦ Strong alignment of interest between management and investors

SAC Capital was most recently involved in another successful IPO, Acromec, which i rated 2 Chilli. Acromec has since tripled in share price. ^_^

I understand the placement was very well received and attracted institutional money. I also like to support IPO companies that have a public tranche even thoiugh the tranche of 2m is very small. Investors who want to try their luck at ATM will have to bid at least 50,000 to 100,000 shares to make it worth the effort.

Based on the above reasons, i am going to give Advancer a 3 chilli rating. I believe the IPO should be well received and will enjoy a nice pop on debut. Do note that Mr. IPO is vested.

Mr. IPO is a Chartered Financial Analyst and a Chartered Accountant. He currently works as an investment professional.

Mr IPO: What I like about ADVANCER GLOBAL

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