Softlogic IPO

I don't mind if the founders of the company do subdivisions as much as they want and increase their stake. ODEL also did that prior to the IPO. Founders actually are the risk takers. What makes private placement different from IPO? If you have s*** load of money you will get invited for private placements. So companies always make the private placements attractive than IPO to attract high net worth investors. If its not attractive enough for them, then they wont subscribe. So private placement is always at a massive discount and almost very less risky. Its unfair to give a massive discount to the big fish and then offer at high for public

enslive wrote:Hey guys ,

investors who subscribed for a private placement are the most risk takers , therefore they should be rewarded.We know that the private placement's issue price is 72 , they have a right to subdivide any numbers before going for a IPO giving private investors correct price

I am a small investor , but I am CIMA accountant . My view is , we can't do judgments without evaluating softlogic's true value

What do you say ?

Don't just try to apply what you studied on books directly and blindly. I'm also a CIMA qualified (not an accountant;of course) with a degree on top.

Pricing cheap when there is real risk is justifiable. Those who support and help the company to stand up during initial days are called Venture Capitalists. for them it is ok even to give at very cheap price. because they bear the real risk.

Say Google got the seed capital of 25mn from a renowned venture capitalist named John Doerr,the same person gave hands to Netscape and Amazon to stand up in the initial stages. the people like them worth getting the share at huge discount because of the risk they are putting in.

http://en.wikipedia.org/wiki/John_Doerr

the so called risk bearers of Softlogic are not those who got into the boat when their were huge level of uncertainty. thus not entitle for this level of risk premium for holding the share for last one year on a well established company like Softlogic.

As someone pointed out the founders may or may not split the shares on their own discretion but selling those shares at a very cheap price to HNWI & JKH and pricing the same share at a very high premium at the IPO is unjustifiable.

tinyman wrote:

Pricing cheap when there is real risk is justifiable. Those who support and help the company to stand up during initial days are called Venture Capitalists. for them it is ok even to give at very cheap price. because they bear the real risk.

Say Google got the seed capital of 25mn from a renowned venture capitalist named John Doerr,the same person gave hands to Netscape and Amazon to stand up in the initial stages. the people like them worth getting the share at huge discount because of the risk they are putting in.

the so called risk bearers of Softlogic are not those who got into the boat when their were huge level of uncertainty. thus not entitle for this level of risk premium for holding the share for last one year on a well established company like Softlogic.

Good point by tinyman

Some valuation discount can apply to private deal on Softlogic as investors might have been locked in for a while, but even then, not sure if grey market trading has happened, like in the case of Expo Lanka.

But discount can not be too high as Softlogic was no start-up operation, and the CEO has been saying they will go public for the past year.

But let's see the share valuations first, we can't decide just on basis of absolute share prices.

Private placement was supposedly done in March 2010, so it would have been based on March 2011 forward earnings. Pricing should not be done on historical earnings, some details of which were in Softlogic's Asiri Hospital mandatory offer document.

Public IPO in June 2011, will be based on March 2012 forward earnings.

So we wait to see the numbers, and forecasts.

cse.alpha wrote:
Good point by tinyman

Some valuation discount can apply to private deal on Softlogic as investors might have been locked in for a while, but even then, not sure if grey market trading has happened, like in the case of Expo Lanka.

But discount can not be too high as Softlogic was no start-up operation, and the CEO has been saying they will go public for the past year.

But let's see the share valuations first, we can't decide just on basis of absolute share prices.

Private placement was supposedly done in March 2010, so it would have been based on March 2011 forward earnings. Pricing should not be done on historical earnings, some details of which were in Softlogic's Asiri Hospital mandatory offer document.

Public IPO in June 2011, will be based on March 2012 forward earnings.

So we wait to see the numbers, and forecasts.

Mate I got a chance to have a glance at the Softlogic 2009-2010 annual report. What i observed is the company is running with very high level of gearing with almost all the assets are mortgaged, some with personal guarantees by AP.

Will wait till the numbers to come out

Lets wait for the Prospectus without speculating its content. Softlogic is a well run business with a proven track record. Such businesses should be evaluated on the basis of its business merits and future potential than mere speculation.

Given below is the Sector Breakdown of Softlogic Holdings as depicted in the website www.softlogic.lk for the information of the readers.

Quibit wrote:Lets wait for the Prospectus without speculating its content. Softlogic is a well run business with a proven track record. Such businesses should be evaluated on the basis of its business merits and future potential than mere speculation.

No, i'm not speculating, I got to refer the annual report, that's what i said. if anyone who has Expo private placement shares bought on Gray market would have got the Annual report and would agree with what i said here.

will wait till the prospectus to come

This is defenitely over valued. Over Valued than expolanka. And we have blamed expolanka for unethical pricing.

Better is that we take a look at the prospectus and come to our personal decisions and share in this forum.

Its also better to wait and watch before applying to this, how expo lanka will react in the market. By observing expolanka movements we could have a precise decision whether softlogic is worth for such a high price.

Like someone said, if they are using this money to retire most their debt, then it will limit expansion of the business.

Asiri Hospital Holdings PLC (ASIR), Asiri Central Hospitals PLC (ASHA), Asiri Surgical Hospital PLC (AMSL) and Softlogic Finance PLC (CRL), four subsidiaries are already listed in the market and Softlogic-owned Central Hospitals which is yet to come with an IPO.
So all these will be under softlogic holdings and the rest will be in the market aswell. Wont this effect the share price?


Will this IPO be in the lockin period?

Found another article

softlogic explains pricing strategy,grawth plans



http://print.dailymirror.lk/business/127-local/45470.html

enslive wrote:Found another article

softlogic explains pricing strategy,grawth plans

http://print.dailymirror.lk/business/127-local/45470.html

I have one concern over this , I have heard somewhere that the companies are prompted to use debt capital if their earnings are expected to grow. But softlogic is doing other way around

prospectus is out
http://www.softlogic.lk/ipo/ipo-docs/Softlogic%20Prospectus%20Final%20File.pdf
At first glance looks ridiculously overpriced.
9 months earnings is 630 million, which if you annualize and adjust for the new issue of shares give an (annualized) EPS of 1.1
that means the PE is more than 26. It will take a lot future "magic" prospects to justify such pricing.
The key point for retailers is in page 48
14 million shares were sold in March/April 2010 for Rs 72 this was split into 10 in February 2011. which means that there are 140 million (nearly the same amount of shares as the IPO) which have cost their owners Rs 7.2
Will those who own 140 million shares at a cost of Rs 7.2 dump it on to the market at 20 levels?
part of the answer can be found in page 49. Bartleet finance has sold 3.5 million shares (which cost them 7.2) for Rs 24 each in March 2011.
so the shares were sold to certain connected parties at Rs 7.2 in 2010, they were sold in the grey market for Rs 24 in March 2011 AND NOW retailers are expected to pay Rs 29 in June 2011.

Thanks innam for the info.
This is reverse Robinhood theory.
They deserve to fail.

specialist wrote:Softlogic private investors to gain over 300% capital gain after IPO

http://www.asiantribune.com/news/2011/05/25/sri-lanka-softlogic-private-investors-gain-over-300-capital-gain-after-ipo

Any Comments....

Bear with me for asking this, how can a person become a so called private investor, does it need huge amount of money or just connections with people? Just for my knowledge I ask.

Rgts!

investor.sl wrote:are we going to lose every ipo's in future?

rijayasooriya wrote:Might be. If CSE will not take some action

That means we would never buy an IPO in future as well.

Niggard wrote:

specialist wrote:Softlogic private investors to gain over 300% capital gain after IPO

http://www.asiantribune.com/news/2011/05/25/sri-lanka-softlogic-private-investors-gain-over-300-capital-gain-after-ipo

Any Comments....

Bear with me for asking this, how can a person become a so called private investor, does it need huge amount of money or just connections with people? Just for my knowledge I ask.

Rgts!

you mean to buy from a private placement ? yes i think you need to have huge amount of money, bcos they sell these things in blocks, one block contains millions of shares ... and i think having connections is a advantage as they get the chance first..

that's understanding about it...

innam wrote:
so the shares were sold to certain connected parties at Rs 7.2 in 2010, they were sold in the grey market for Rs 24 in March 2011 AND NOW retailers are expected to pay Rs 29 in June 2011.

what is grey market?

A second look at Softlogic IPO

Number of Shares to be Issued 139 mn ordinary shares
Issue Price Rs. 29/-

Highlights;
- Primary objective on going live is to retire the firm's short-term debt.
- Acquired Sri Lanka's largest private sector hospital group Asiri Hospital Holdings. (51.7%)
- Dealer for Nokia Phones
- A diversified venture into Finance, Health Care, Automobile, Leisure, IT products Consumer electronics.
- Acquired Ceysand Hotels property in Bentota early 2011 (will be operational in 2012)
- A five star hotel named "Movenpick Hotel Col" is to be commenced construction shortely.

At a diversified Sector PE of 26 (NDB reports) and a EPS of 1.31, Softlogic worth at 28.6 but with Post IPO capital infusion, the growth is expected to be much more which time will decide.

Softlogic had issued 14 mm shares through a PP at Rs 72.00 per share in March / April 2010 and there was a sub division of shares 1 in to 10 in Feb 2011.
This brings down the PP cost to just Rs 7.20. But same shares are offered at 29 for retailers.
More on PP, as per the new rules of SEC, PPs after Feb 2011 has to wait at least 1 year to sell their stake.
Given the circumstance of PP happend in Softlogic in 2010 March/April there wont be any restrictions on selling..

So my idea is a price gain of abt 10-30% could be witnessed on first day trading.. I could be embarresingly wrong but due to the PP there'll be alot of selling pressure which can hindrent the upward momentum..
But if you can hold for several months, with the next qtr results, there can be an uptrend.. Even sometimes if this falls below 35, a lot of collection can happen..And it will also push the price up..

But at the moment this is to me a bit risky.. cuz its the same as in Expo we've heard and more importantly worse than it ;(

Unlike Expo; Soft gray market prices have never went above IPO price, which means each and every fellow who got shares from PP or gray market is at a profit, which may trigger panic selling if prices started to struggle.