Stated Capital (Post IPO) - 655,002,440 Shares
No of Shares (IPO) - 80,000,000
Issuing Price - Rs 15each
Consideration - LKR 1,200,000,000 (1.2 Bn)
Opening Date of Issue - 07 July 2011
Major Share Holders (Post IPO)
Pacific Textured Jersey Holding Limited - 40.00%
Brandix Lanka Limited - 30.10%
Public Share Holdings - 29.90%
Objectives of the Issue
• Construction of Modern Production Facility - 344m
• Commission of water Treatment Plant - 82m
• Purchase of Equipments -1,000m
Favourable facts to subscribe
• EPS (2010/11) is Rs 1.04.Accordingly it values at least Rs20 as Industry PE Ratio is around 20 -25.
• Increasing Profit trend during last 3 years and thereby healthy PEG Ratio.
• No Private placement has been made before IPO. Only subdivision.
• Raw Material Inventory has increased to 13.7Bn from 4.3Bn (212% increase). It indicates they have received a lot of orders for current year and thereby increase both production capacity and profitability. As a result of this next year EPS would be doubled.
• 37% of their productions are transferred to Brandix Apparel Limited at a decided transfer Pricing Method. Therefore they can always keep significant Profit Margin.
• Textured Jersey is a major supplier to apparel manufacturers throughout Asia and end-chain retailers. Amongst its largest clients are Victoria’s Secret, Marks & Spencer and Intimissimi.
• Knit products are the fastest growing segment of the Sri Lankan apparel export market, which is growing strongly even after the end of the GSP+ concessions in August 2010, and Textured Jersey is the country’s pre-eminent producer of value- added knitted fabric.
• This is a medium size IPO therefore we can expect more allocation (around 10%-15%) rather than Vallibel One and Brown Investments IPO’s.
Adverse facts to subscribe
• Challenges in the form of rising cotton prices, high energy costs and loss of tariff.
• On 25/03/2011 they have made subdivision on 5 into 18 Basis.
• NAPS is around Rs 4.53
Based on EPS (Rs 1.04) it should be traded between Rs 20 – 25 as Industry PER is high. Increase of Inventory shows future EPS would be further high. This should be good long term investment unless cotton price increases.
Currently people have negative image on IPOs. Therefore price is expected to be traded between Rs 14 - 17 on first day.