Courts Asia IPO

The Wealth Ninja advocates a healthy diverse mix of assets in your financial portfolio.

A good mix of real estate (unfortunately, a little distant for a single male in Singapore), stocks, bonds, hard and soft commodities ...

Shares are one of the good, and easy way to own productive assets, as lots of shares are not that expensive.

I am an extremely novice in shares, so I would not provide any insight.

I would only share my own experience in IPO.

IPO are usually exciting and there are large amount of information (or noise) in the mass media, so one can easily do piecemeal research. Also, IPO of a fixed price can be easily purchased by participarting banks' ATM network or internet banking which is easy and convenient.

The latest IPO that caught my attention is Courts Asia Limited, at $0.77 per share, deadline at 12noon on 11th October.

Basically in a nutshell... 

Shares at $0.77, the PER (Price Earning Ratio) is at 10.95, a reasonable average figure for retail, and a dividend is predicted to be around 2.x%.

Pro factors

1) Court has a good market dominance of 9.8% in Singapore and 7% share in Malaysia

2) Courts' sales has grown from $580m to $724m in 2012 with an improvement in net profit from $18m to $39m.

3) The CEO and CFO has collectively subscribed to about 14.285million shares, which is a big vote of confidence in their company. Also, the CEO, CFO and the COO are with Courts for the past 15 years, another thumbs-up to the management.

4) The cornerstone investors, JF Asset Management, New Silk Road Investment, Target Asset Management and Value Partners are reputable and widely regarded as long term investors.

5) Courts intend to use the proceeds to expand in Indonesia. Given the large expanding market in Indonesia, this offers a good long term growth plan.

Con factors

1) Courts' parents company, Singapore Retail Group (SRG) is using the IPO as an exit strategy to reduce its stake in Courts. This IPO is the 4th attempted by SRG, which seems to have little confidence in Courts' future growth.

SRG will gets $86.2m from the IPO while Courts Asia gets only $43.8m.

2) Courts previous attempts in Indonesia lost money. With this IPO, the intention of their first Indonesia store is only in 2014, a good 2 years away.

3) Market saturation in Singapore and Malaysia for furniture and electronic retailer.

Despite the big con (parents company exiting Courts), which is a negative vote in the future growth of 

Courts, I will apply for the IPO (only 5 lots) to start off my dividend portfolio. I do believe that the Indonesia growth can be a good strategy as Indonesia is a large market, and Courts' ability to provide in-house credit is a big advantage to its business strategy in wooing the lower income families.

I have done my simple homework, and hope this would be a good start.