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OM IPO Research
IPO - BCM Alliance
Industry & Business
BCM Alliance deals with hospitals supplying medical devices which is a good industry to be in at the current moment. But the problem with supplying to hospitals usually meant that margins are squeezed badly being the middle man.
In the case for BCM, indeed margins are squeezed to near single digits and continuously getting threats from competitors which can offer cheaper alternatives or bigger discounts to hospitals. If products are basic generic medical equipment which in this case, ‘yes’; there are even more competitors out there supplying the same equipment but different brands. This explains the 2.5 rating on the ‘Moat’ that we are giving since the only moat is the brand name that it carries.
Listings
Not sure if many of you have gone through the details of the IPO but only 30% of the company would be offered to public in this IPO. The structure looks like this post IPO. (extracted from the prospectus)
In fact with the 30% (84.25 million shares) going to public, directors could take up 9 million which represents 3.2% and cornerstone investors would take up 18.95% of the company while the public is left with only 22 million shares or 7.83%
We expect limited liquidity available during the lock in period and if company performs badly inside the lock in period, it is likely that the stock price would tumble as soon as cornerstone investors get to sell their holdings.
Utilisation of Proceeds
The utilisation of proceeds isn’t that convincing either with 15.6% (that’s a huge sum) devoted to listing expenses compared to only 16.2% used for setting up 11 self-service launderette. Much of the other funds raised are used to stock up the company’s inventory. This is the reason why rate the proceeds at 2 which is the lowest rating among others.
Financials
As said earlier the margins are squeezed badly. One thing to be relaxed about is having a healthy debt level where post IPO debt/equity level are estimated to be at 23.49% Overall, we rate financials a 5.8 which meant that it is having satisfactory financial position.
Conclusion
We do not recommend this IPO much of it due to its listing structure and poor utilisation of proceeds.
Click on Pic below for Prospectus Extract
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Discussions
Be the first to like this. Showing 22 of 22 comments
I think investors still like small IPOs compare to big ones. Can refer to the case of biggest IPO of the year -- Ranhill, is it performing? in fact small IPOs are performing relatively better.
2016-10-04 21:43
Perak Trasnit ( IPO RM 0.15 ) is doing good today, about 25% to 30% profit in return on 1st day trading. I think it is the market trend. Can go for IPO and easily can make 25% profit on the 1st day trading. Pls note that BCM has less number of shares compare to PErak Trasit.
2016-10-06 12:27
To be honest, how we look at IPO is this way...
Some of these companies that are raising money and 'small' really needs it either to close some debts or really their financials had limit their expansion.
Similar to big companies, IPO comes in when they need cash to execute a major project. But during slow economic times like what we are going through now, projects awarded aren't that big and some could still finance it through debt since its still a cheaper alternative. But small ones might not and end up over leveraging so they seek public listing no matter what the valuations are.
The KLCI isn't doing good either meaning its hard to secure cornerstone investors if you plan to list like RM10 billion into the market. Nobody likes to approve any big investment sum during bad times and remain cautious. When KLCI is rallying, many would pay the premium seemingly the IPO might turn out the be a bargain compared to a high valuation bull market rally.
In the case of good performance with Perak Transit. We already expected that it would do good earlier in our post. But we are not confident for BCM Alliance as explained above.
2016-10-06 16:22
We rate Perak Transit an 'average' but that is still higher than what we rate BCM Alliance. Expect to see weaker 1st day for BCM Alliance. You can refer to our Perak Transit post here.
https://omightycap.wordpress.com/2016/09/22/ipo-perak-transit-berhad/
2016-10-06 16:24
speakup....kicik IPO tapi % gain manyak musa.......Musa IPO....% gain manyak kiccik...which one you prefer ??????????
2016-10-06 17:31
Depends who the operator, mostly not too strong biz easier to goreng i.e. mostly likely they ....agreed to work with operator. I heard PTrans operator are same operator from Anzo.
2016-10-06 17:38
JF Apex Research fair value for BCM Alliance at 31 sen | http://www.klsescreener.com/v2/news/view/135775
2016-10-10 21:05
Latest News, Corporate
Public IB accords fair value of 26 sen for soon-to-be-listed BCM Alliance shares
Latest News, Corporate
Public IB accords fair value of 26 sen for soon-to-be-listed BCM Alliance shares
2016-10-10 22:03
An official blog in I3investor to publish research reports provided by PublicInvest Research team.
All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp
2016-10-10 22:59
KUALA LUMPUR: JF Apex Research has ascribed a fair value of 31 sen for BCM Alliance – which supplies equipment for the commercial laundry and medical devices -- which is 63% above its offer price of 19 sen.
It said on Thursday its valuation was pegged at 13 times FY17 EPS forecast of 2.4 sen.
“Our target price-to-earnings ratio (PER) is lower than the trading and services industry’s average PER of 18 times in view of its smaller market cap,” it said.
2016-10-11 03:57
Ridiculous 31 sen. Which sucker going to kena???
Better avoid it!
1. What kind of progress can company make with 11 laundry outlets?
2. RM16M for 11 laundry outlets? (Mainly) It would be more economically for them to take it from other operator (packages start from RM150k to RM300K per outlets with 6-8 machines).(optimum)
3. Highly competitive, saturated, low entry barrier businesses, no significant brand, no market advantages.
4. Share issung structures are not liquid
On Listing day make sure use algorithm trading systems.
P.s. @my house always on promotions.....unable to charge full rates.
2016-10-13 23:06
I think they adviser/investment banker for the BCM alliance IPO should really think if they really know what is the correct shares to be issued. Some more charging RM2.5mil IPO fees.....
With this kind of subscription rate, BCM should have go for a RM1bil IPO not a RM22mil IPO, (10% listing expenses)
Then they can open 1,100 speed queen stores, not just a mere 11 stores.... what a waste............for such a company
2016-10-14 11:27
JF Apex Research should have studied in detail and done their homework before commented 31 cents as fair value. BCM Alliance supplies equipment for the commercial laundry and medical devices too. Not rely solely on laundry new outlets.
2016-10-14 17:29
Something are not right. Everybody know, any apek, makcik can setup self services laundry outlet with RM150K - RM300K. Just call any operator(over 20 of them) and they are offering complete packages; including renovations and machines....some even offer easy payment.
So I think RM2.6M should be able to cover 11 outlet for everything i.e. with the machines.
Then they need another RM7.7M for purchased of brand new laundry equipment and medical devices????? Why??? Try to make business within business? Make money from our money?? Going to be like MAS (director and insider jack up prices...they do business within.
By right...they should be able to cut down set up cost....since they are the supplier of the machines. Why do they need to buy medical devices??? They just need a demo machines and the rest are order as and when customer order.
They need RM3.2M for working capital to be spend within 12 mths i.e @ RM266K a mth....I assumed this for 11 outlet only(not including HQ)....@RM24K per outlet per mth.....rather high....you just need 1 person to take care 24hrs self services laundry outlet.
Would be faster, cheaper for them to franchise it and less risk.
Use of fund from ipo.....emmmm.....this is simple biz you can think for yourself.....don't need super dumbo analysts to tell you.
Good luck
2016-10-14 19:17
BCM reported a 32.2% increase in net profit to RM2.59m for the 2nd quarter ended June 30, 2016.
2016-10-20 22:01
genesis81 yes.. they r planning 11 new outlets. but this is to increase its brand awarenesss that enable them to attract new customers into setting up their own self-service laundrette outlets. means to say, franchise...
24/10/2016 23:29
genesis81 and most important is that... they are focusing to medical devices which they have submitted about rm77 million worth of tenders between april and august.
24/10/2016 23:31
2016-10-25 08:52
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speakup
where are the BIG IPOs? why now all the small kecik IPOs listing?
2016-10-04 18:01