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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Textured Jersey IPO Analysis

Textured Jersey IPO Analysis

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1Textured Jersey IPO Analysis Empty Textured Jersey IPO Analysis Mon Aug 08, 2011 12:05 pm

laka

laka
Senior Equity Analytic
Senior Equity Analytic
Name of the company - Textured Jersey Lanka Limited
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



Valuation

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.

But

Currently people have negative image on IPOs. Therefore price is expected to be traded between Rs 14 - 17 on first day.



2Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Mon Aug 08, 2011 4:37 pm

DK


Manager - Equity Analytics
Manager - Equity Analytics
Interim Fianancials for TJL are available at http://www.cse.lk/cmt/upload_cse_announcements/171312799064_.pdf

3Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Mon Aug 08, 2011 5:30 pm

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
Net Book Value per share = Rs 5.42
Annualized Price/Earning Ratio = 14.98

Depending on your view of Textured Jersey's prospects...
Some would say the share is worth (2 X NBV) = Rs 10.84
A few would say it is worth (PE ratio of 20) = Rs 20.03
I think the truth lies somewhere in between. Determining the worth of a share is a subjective thing.

If I had been in charge of pricing this IPO, my job would have been to ensure that the IPO is fully subscribed at the highest price possible. I also would have priced it at Rs 15, right in the middle of the Rs 10 - 20 range.
If it had been my objective to also ensure that IPO allottees get a decent gain on listing, I would have priced it at Rs 12.

4Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Mon Aug 08, 2011 9:20 pm

Namalaka

Namalaka
Manager - Equity Analytics
Manager - Equity Analytics
@Antonym wrote:Net Book Value per share = Rs 5.42
Annualized Price/Earning Ratio = 14.98

Depending on your view of Textured Jersey's prospects...
Some would say the share is worth (2 X NBV) = Rs 10.84
A few would say it is worth (PE ratio of 20) = Rs 20.03
I think the truth lies somewhere in between. Determining the worth of a share is a subjective thing.

If I had been in charge of pricing this IPO, my job would have been to ensure that the IPO is fully subscribed at the highest price possible. I also would have priced it at Rs 15, right in the middle of the Rs 10 - 20 range.
If it had been my objective to also ensure that IPO allottees get a decent gain on listing, I would have priced it at Rs 12.

Good Analysis.. Thanks..

5Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Mon Aug 08, 2011 9:36 pm

dineshfernando


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
If you wait for sometime it may be possible to buy below IPO price.

Eg from recent IPOs - EXPO, FLCH, BIL and SHL

Therefore, don't rush on the first day.

6Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Mon Aug 08, 2011 9:58 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Considering the recent nonsense IPOs which were too high when pricing criteria is considered, my view is that after VONE, Jersey is on a fair value base..

7Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Mon Aug 08, 2011 10:21 pm

Aamiable


Vice President - Equity Analytics
Vice President - Equity Analytics
Epa wela athiyenne.. ...

8Textured Jersey IPO Analysis Empty Re: Textured Jersey IPO Analysis Tue Aug 09, 2011 12:51 pm

NimeshaJK

NimeshaJK
Manager - Equity Analytics
Manager - Equity Analytics
@Antonym wrote:Net Book Value per share = Rs 5.42
Annualized Price/Earning Ratio = 14.98

Depending on your view of Textured Jersey's prospects...
Some would say the share is worth (2 X NBV) = Rs 10.84
A few would say it is worth (PE ratio of 20) = Rs 20.03
I think the truth lies somewhere in between. Determining the worth of a share is a subjective thing.

If I had been in charge of pricing this IPO, my job would have been to ensure that the IPO is fully subscribed at the highest price possible. I also would have priced it at Rs 15, right in the middle of the Rs 10 - 20 range.
If it had been my objective to also ensure that IPO allottees get a decent gain on listing, I would have priced it at Rs 12.

that is very impressive dude...
it's currently trading at Rs.14.10/=
So you're 98% correct..
keep up the good work

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