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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Some reflections on Alumex IPO

Some reflections on Alumex IPO

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1Some reflections on Alumex IPO Empty Some reflections on Alumex IPO Tue Feb 25, 2014 2:24 pm

puliyanam

puliyanam
Manager - Equity Analytics
Manager - Equity Analytics
Alumex Limited (formerly Alutec Anodising & Machine Tools (Pvt) Limited) is a 60.88% owned subsidiary of Hayleys PLC( 171,332,200 shares) as at today (Feb 2014).

Hayleys bought 95% of the company for LKR 2.185 billion in November 2010 (at just over LKR 8 per share if I am not mistaken). It is perhaps noteworthy to mention that the LKR 2.185 billion was finance by debt facilities that were available to Hayleys at that time and Fitch Rating Agency by 12th November 2010 put a Rating Watch Negative (RWN) on Hayleys due to excessive debt, leading to finally Hayleys being downgraded by Fitch and Fitch withdrawing its ratings on the conglomerate. What Hayleys did however, is to sell part of the stake to Rosewood (PVt) limited, Akbar Brothers (Pvt) Limited and Star Pack Investments (Pvt) Limited each around  by 22nd November 2010.

Alutec Anodising & Machine Tools (Pvt) Limited and began its operation in 1988, which had 5 subsidiaries at the time of takeover, had 55% share of Aluminum Extrusion market in Sri Lanka according to the company’s estimate in 2010 with 400 staff. These five companies were amalgamated in 2012 to create only two subsidiaries for Alumex (details in page 50-52 of Prospectus)

I quote below the thinking behind acquiring Alumex as per Mr. Perera
I’m very interested in the manufacturing business and Aluminium is part of that. When we did a study in Sri Lanka we realised that there was no quality Aluminium but two companies were already manufacturing Aluminium. We looked at the possibility of coming in as a third player and produce quality Aluminium. However we realised that the market was too small as such we decided to acquire one of the already existing companies. We acquired one company, up to 36% the price they were asking for the balance shares was too high. Then we acquired Alumex. (Business Today, 2011)


It is worth noting that the other key competitor in Aluminum is Lanka Aluminum Industry PLC (LALU.CM). Mr. Perera himself owns over 29.13% of  LALU currently. He made a mandatory offer for 66% of LALU at LKR 41.50 in 2011 April which was seen by valuers as unattractive.

So, if ceramic industry is any guide, like the Chinese string of pearls,  it is a grand scheme of creating monopolies….  You may want to be a part of it......But do your valuations before deciding....

2Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 10:57 am

Lalindra

Lalindra
Manager - Equity Analytics
Manager - Equity Analytics
Alumex IPO opens today. There were much debates and discussions on previous IPO's but I didn't see much discussions on this IPO in this forum.
The above information is somewhat informative and useful. Judging by the past posts I know there are other experts who are members of this forum who are well informed and knowledgeable. I would much appreciate if they share their thoughts for discussion.

3Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 11:02 am

Jeremy

Jeremy
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I am bit worried about the dealers/Distributors of ALumex who had been given shares free by the previous owners Williams family. Although the quantity is not significant, there is a possibility that they may exit after the IPO.

4Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 11:10 am

Lalindra

Lalindra
Manager - Equity Analytics
Manager - Equity Analytics
GMNet wrote:I am bit worried about the dealers/Distributors of ALumex who had been given shares free by the previous owners Williams family. Although the quantity is not significant, there is a possibility that they may exit after the IPO.
Thank you GMNet. This is useful information which will have an impact on the initial trading after the IPO.

5Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 11:13 am

Jeremy

Jeremy
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Some reflections on Alumex IPO Screen43
Aluminium prices set a low at $1,758 per tonne late in June and have since largely oscillated sideways, although there was a significant 10.9 percent short-covering rally in August that was prompted by the combination of better-than-expected data out of China and some dovish comments from the Fed. The rally did not last and prices quickly returned to lower levels, which we take as a sign that there is not much appetite or, indeed, a need to chase prices higher. Given the plentiful supply, high levels of inventory and only limited production cuts so far, it seems likely that the upside potential for prices will be limited to bouts of short-covering.

Fundamentally, prices should head lower - we feel they will end up doing so - but for now the mechanics of the LME and abundant and cheap liquidity are enabling sufficient metal to be kept off market to underpin the market’s price structure. How long these factors remain in force is debateable - there are numerous crosscurrents at work that could bring about meaningful change. Overall, the demand outlook for aluminium remains second to none, but the market is in chronic oversupply as it has been for seven years and market forces are likely to change that before too long.

- See more at: http://www.fastmarkets.com/base-metals/aluminium-analysis-forecast-q4-2013#sthash.HOR0nGkm.dpuf

6Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 11:34 am

Lalindra

Lalindra
Manager - Equity Analytics
Manager - Equity Analytics
Perusing the recent financials of LALU could also give one an indication as to which way the potentials of the Aluminum market is heading.

7Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 1:17 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@gmnet

The world aluminum price has collapsed because aluminum mills are used as a way of burning off excess electricity.....

China has been producing excess electricity and is burning it off via aluminum production that is creating a glut in supply

8Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 4:54 pm

Light of Hope


Vice President - Equity Analytics
Vice President - Equity Analytics
There are 3 stages in Aluminium production. Most companies are involved in only one of the these stages.
Only companies that large enuf can handle at least two of them.
That's global scenario.
Did any of you check what this company doing?

Actually the global financial crisis in 2008/2009 saw Aluminium prices falling in price abt 50%.

9Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 5:50 pm

Aubrey Perera


Vice President - Equity Analytics
Vice President - Equity Analytics
So have forum members subscribed ? I have a feeling this might be one of the better IPO's that have come in to the market. Interesting to see opening day of trading.

10Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 9:13 pm

Light of Hope


Vice President - Equity Analytics
Vice President - Equity Analytics
I asked for abt 100K.

11Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Thu Mar 06, 2014 9:40 pm

Lalindra

Lalindra
Manager - Equity Analytics
Manager - Equity Analytics
http://cse.lk/cmt/upload_cse_announcements/5341394090187_.pdf
This is good news but wonder how many times over?

12Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Fri Mar 07, 2014 9:51 am

Jeremy

Jeremy
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Sri Lanka's Rs850mn Alumex IPO oversubscribed

Mar 06, 2014 (LBO) - An 853 million rupees initial public offer by Alumex Limited, an aluminium extrusions maker has been oversubscribed within hours of opening Thursday, managers to the issue said.

The offer will be kept open till 4.30 pm today, NDB Investment Bank said.
The firm offered 17.85 million shares to raise 250 million rupees for factory expansion. Existing shareholders were selling down another 42 million shares.

The sale will allow the firm to qualify for lower corporate income taxes given to companies listing on the stock exchange before March 2014.

In the nine months to December 2013 the firm said revenues rose to 2.02 billion rupees from 1.8 billion rupees and cost of sales rose to 1.43 billion rupees from 1.28 billion rupees allowing gross profits to rise to 547 million rupees from 483 million rupees.

Finance costs fell to 15.7 million rupees from 38.9 million rupees.

Profits rose to 283 million rupees from 216 million rupees.

The company will have 299 million shares after the initial public offer.

13Some reflections on Alumex IPO Empty Re: Some reflections on Alumex IPO Fri Mar 07, 2014 11:01 am

VALUEPICK

VALUEPICK
Expert
Expert
@GMNeT

One of the successful IPOS in 2014!

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