The hot topic this week and probably the past week was one of the biggest local IPO since Singtel’s IPO many many years ago.
Its so hot that its been a long time since I am immerse in an IPO craze.
Many dividend investors would be interested in this IPO so what is my assessment of it?
Not a REIT
Firstly, it sounds like a REIT, the news is structured like a REIT but in fact, technically it is not a REIT. The company is not oblige to pay out 90% of its income as dividends.
The level of gearing is on the high side as well. Many street commentators say this would not be an issue since it is linked to GLC and in bad times the Garment would support this.
Well, it remains to be seen whether this company is sustainable in the long run, the business structure is such that it is very counter cyclical.
However, the caveat from the 2007 crisis is that companies that have huge refinancing risks during credit crisis is a big risk.
Past Performance of Government link issues
Divestments from government issues do not have a very good track record. If you look pass all the circus, know that any sensible manager will not release an IPO when their assets are undervalue. They want the maximum dollar and would always release when times are good.
That said, we haven’t have such a large IPO for some time but I think the results should be good if you want to earn some kopi money and throw the stock after the first few days.
Disclosure: I should be subscribing to this issue
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