Neo Group 粱苑集团

Download the Prospectus here

Neo Group 粱苑集团

Offer Price: $0.30
Offer Size: 22m new shares
Public Tranche – 1m shares
Placement Tranche – 21m shares
NAV per share (post-IPO): S$0.101
Historical PE: 6.8x (FY12)
Market Cap (post-IPO): S$43.2m
Open: 3 July 2012
Close: 9 July 2012, 12.00 noon
Trading: 11 July 2012, 9.00 a.m. (on “ready” basis)

I have to admit that I am a customer with Neo Garden Catering

for quite many years, having ordered buffets on numerous occasions

especially during the Chinese New Year period from them.

The food and customer service were rated above-OK by my 

guests, relatives, friends and family members, and of course,

my own choosy mouth. To say the truth, I was fairly surprised

that Neo Group is going for listing at this testing period but I 

guess it is a case of 明知山有虎， 偏向虎山行. For that, I admire

its Chairman and CEO, Mr Neo Kah Kiat's courage and foresight.

Ok, back to the IPO. 

Neo Group Limited is a leading food catering group with some of

the most recognised brand names in Singapore. In a report dated

April 2012, the company were ranked by Euromonitor International
Limited (“Euromonitor”) as the number one events caterer in Singapore.

Neo Group have received several awards over the years and if you

are interested or curious to know what they are, you can get more

detail at Neo Group Awards and Accolades   

Currently, Neo Group has three arms in the food catering business

that serve different population segments - Neo Garden Catering, 

Orange Clove and Deli Hub. Under food retail, the group has a chain of

16 Umisushi outlets offering Japanese convenience foods islandwide.

Through its “Neo Group Catering”, “Orange Clove”, and “Deli Hub” brands,

they supply buffets spanning a wide variety of styles and prices to suit a

diverse range of occasions, from private to corporate and community functions.

Its offerings in the catering business include daily meal delivery services,
Halal-certified food as well as catering for last minute events or emergency orders.

The company had recorded a net profit of 5.4 million in FY 2012with a

revenue of 38.4 million and that is net margin of 14%. Neo Group will raise

about S$5 million from the listing of shares and they will use the net 

proceeds o expand and develop our Food Catering Business and Food

Retail Business (which may include acquisitions, joint ventures and/or

strategic alliances)

Based on the offer price of 30cts, Neo Group with an NAV of just
10.1cts will have a 196% premium of Invitation Price per Share
over the Adjusted NAV per Share. This is a very rich valuation
of the stock offer price. Also it is worthy to note that the new

investor will be paying 30cts a share while the boss and directors

are paying 0.41cts and 8.43cts respectively. I believe that investor'

will be able to get the share at much cheaper price after the listing.

Neo Group intends to distribute dividends of at least 60% of its net

profits for the next three years, FY2013, FY2014 and FY2015.

It is quite a generous dividend distribution but I have my reservations.

A comparison between its peers like Select Group, Food Junction,

Thai Village, Sakae and Soup Restaurants reveals that it will is listed

with a much high valuation with higher PE ratio and P/B.

Somehow, I believe that once the initial IPO hype on the stock is

over, we will be able to get the stock below the IPO price of 30cts.

This is a company that I personally use its service and I believe that

it can still achieve growth under the guidance and direction with its

CEO, but from an financial view, this is exactly how I feel about the company. 

My suggestion is still to Subscribe for the Public tranche with a view

of selling off the stock with profits within the first few days of listing.

The public tranche only has 1 million shares and to  get it is

really purely luck but I will still risk my $2 application fee nevertheless.

For those who worry about not able to apply for the next IPO, 

IHH Healthcare as the money may be still in Neo Group IPO.

Fear not, as the money will be returned to you back on Tuesday

night and just in time to apply for the IHH Healthcare which IPO 

application closed on Wednesday.

Source: Neo Group IPO Propspectus, http://www.neogarden.com.sg
NRA Capital IPO Watch on Neo Group