It has been awhile since we found solid IPOs that are worth to subscribe. Binasat seems to be interesting with its prospectus. The attachment below contains things that are important and extracted from the prospectus so you don’t have to go through 350 pages of it.

As usual this is how we start and rate the fundamentals.

Growth 7/10

The story for growth is strong where in the pre-prospectus stage, we see the company talking about expansion into frontier markets like Myanmar, Vietnam and Laos. If you are positive on the ability of the company to growth there, then this would be a good choice.

Furthermore, the fibre optic segment is still something that many have yet to tap on for the South East Asian region. We forecast that this would be the difference maker in the future comparing to how much the company relies on satellites for its current revenue.

Industry 7/10

Unlike telco service providers that we dislike to invest, this seems like a a telco company but the different is totally different from the likes of Maxis or Digi phone line providers. Binasat is more towards a service provider for telco companies.

Maxis in particular uses the satellite services at the current moment where the services includes satellite.

Extracted from The Sun

Domestically, the group claims to have a 57% market share for maintaining satellite ground stations located at petrol stations and 64% market share for O&M for all satellite ground stations.

Financials 8/10

Indeed very solid margins and we can only hope that the company continues to perform so. The consistency can be seen over the years not only the year prior to IPO. Basically we do not sense any form of beautifying the income statement just for the current IPO.

Moat 8/10

Going back to the extract above, it stated that they have 57% market share for ground stations. We believe this form of moat is high and its customer base has one of Malaysia’s largest telco operators which makes it hard for other opponents to enter the market.

Proceeds 8/10

Top class proceeds where we always like to see. Most of the money goes into investing in assets that provide a continuity to the business and long term gains. Only 27% of the proceeds would be used on working capital. It is very unlikely that this would be used to pare down debt since the amount of borrowing merely hits only 28% debt to equity.

Valuations 5/10

Although all the other fundamental numbers are more than satisfactory, we felt that the stock is listed at the more expensive end of things. You might question paying only PE of 11 is quite low seemingly the KLCI PE is somewhat close to 16. As a matter of fact, we have to factor in that IPO valuation needs to be much lower in term of premium to buffer our investment.

We have ensure that there is a likelihood of a quick flip on the first day or being really cheaply priced for long term holding in the case where it doesn’t boom in the first day. We felt that a PE of roughly below 9 is much better to get a higher valuation score.

Conclusion

Average valuations suggest that we do not go all out on the subscription, we suggest that you subscribe 70% of what you are used to for this issue. We felt that on the first day of listing, it might spark a 8-9% gain. Considering as well new year and many investors are seeking new things to put money into.

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