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19-07-2012, 11:45 PM
(19-07-2012, 10:35 AM)shanrui_91 Wrote: Investor Central. We ask the questions that need to be asked:
1. The company will use S$8.3 mln of the IPO proceeds to repay its short-term loans taken for expansion of capacity in Malaysia. One of the loans is due for repayment in next couple of months. Why did it not borrow funds for a longer period in the first place? Did it raise IPO only because it couldn’t refinance these loans?
2. Cash from operations fell dramatically in 2011 due to a steep rise in its trade receivables. Why did trade receivables rise more than 100%, even as revenue grew only 37%? Are its customers having troubles in paying their dues?
3. While the company is using a part of IPO proceeds to repay loans for expansion, it could have easily repaid them with the dividend declared in 2011 alone! Why didn’t it do so as the promoters were already drawing salaries from the company?
4. The management intends to distribute at least 30% of its profits in 2012. But it doesn’t follow a fixed dividend policy. In the last two years, the company has distributed 70.6% and 58.8% of net profits as dividend. Why such drop in dividends for 2012?
5. JB Foods was established in Malaysia 30 years ago. By incorporating and listing in Singapore, it will end up with greater tax liability and currency translation risk. So, why did it not seek a listing on Bursa Malaysia instead?
6. Given its foreign exchange exposure, and the strengthening ringgit, it's no surprise the company tried to hedge its forex exposure. But it doesn't look like it's getting it right. Why did the company lose RM2.3 mln in fair value of derivative financial instruments in 2011?
7. The prospectus states market share figures for 2010. What was its market share in Malaysia in 2011? Why didn’t the prospectus share the latest figures?
8. If palm oil is such a growing competitor against cocoa, why not expand into palm oil processing?
9. The family that started JB Foods owns its stake in the company through its family holding firm JBC Group. The former name of JBC Group was Guan Chong Food Industries, a remarkably similar name to Guan Chong Cocoa Manufacturing Sdn Bhd, which is listed in the prospectus as a competitor to JB Foods. So the question is: does the family own and/or control a direct competitor to JB Foods? If so, how can we be sure the family will act in the best interests of JB Foods?
10. How is demand from its major markets Western Europe and the US holding up, in view of the ongoing debt crisis?
11. JB Foods plans to setup a laboratory by 2014. How much does it plan to spend on its R&D annually?
12. How certain is the management about exercising the call options for PT Koko and Kakao GmbH? What is the value of these two companies and how much will JB Foods spend if it were to acquire these companies?
13. The company’s ‘other expenses’ for 2010 include a listing fee of RM662,746. What is this item?
14. The company sold some plant and equipment at a loss of RM86,387 in 2011. Which assets did it sell?"
http://www.investorcentral.org/show_text...xtid=15567
Omg these questions are really insightful. Seems like this IPO really looks quite dubious.
(Im no tax expert) For tax, i guess the earnings will be appropriated by the amount of work conducted between the 2 countries. If substantial work is conducted in Singapore, taxation in Singapore would probably be higher. For Singapore to be the functional currency, much of the trading (buying selling of materials and products) could be done in Singapore (especially since the customers are located worldwide). Similar to companies which are listed in Singapore but with their factories overseas, there should be tax benefits with it.
I agree that there is high chance that the company decided to IPO because of cashflow issues. Due to their current high debt levels, they are probably unable to obtain a refinancing at favourable rates, which is which they chose to come for an IPO, at such low terms. Noticed they moved MYR40m of short-term secured debt into unsecured debt between December 2011 and April 2012. Could be a bridging loan/overdrafts for preparation of the IPO.
With Guan Chong getting a 12x PE in Malaysia, it seems kind of weird for the company to want to list in Singapore at a 6x PE.
Really interesting to see how the IPO will do.
