Courts Asia Limited

Download the prospectus here

Court Asia Limited

Offer Price: $0.77
Offer Size: 60m new shares + 118m vendor shares
Public Tranche – 8.9m shares
Placement Tranche – about 169m shares
NAV per share (post-IPO): S$0.30
Historical PE: 11.5x (FY12)
Market Cap (post-IPO): S$431m
Open: 9 October 2012
Close: 11 October 2012, 12.00 noon
Trading: 15 October 2012, 9.00 a.m. (on “ready” basis)

Courts Asia Limited (Courts), one of the leading electrical products, 
IT producers and furniture retailers in Singapore and Malaysia  is 
launching its initial public offering of 178 million Offering Shares at 
the Offering Price of S$0.77 per share, the top end of indicative price
range, due to strong support from institutions during its book-building
international road shows. According to some reports, the placement
tranche has been more than 3 times oversubscribed.

Courts Asia is offering 60 million new Shares and Singapore Retail 
Group Limited (SRG) is offering 118 million existing Shares for subscription
and/or purchase.
The Enlarged Offering of 178,000,000 Shares comprises:
(a) an international placement of 76,895,000 Offering Shares to institutional
and other investors in Singapore, outside the United States
(b) an offering of 8,900,000 Offering Shares to the public in Singapore
(c) 77,920,000 Shares offered under the Cornerstone Tranche
(d) 14,285,000 Shares offered under the Management Subscription Tranche.

The Global Offering comprises the Placement, Public Offer and Cornerstone 
Tranche. Collectively, subscription by the four cornerstone  investors amounted
to total investments of S$60 million, representing 44% of the Enlarged Offering.
The cornerstone investors are JF Asset Management Limited, New Silk Road Investment Pte Ltd, Target Asset Management Pte Ltd and Value Partners
Hong Kong Limited. CEO Terence O'Connor and CFO Kee Kim Eng will be 
subscribing for the Management Tranche which is about 8% of the offering.

Courts Singapore was also previously listed on the Singapore Exchange (SGX),
before being taken private by Singapore Retail Group (SRG) in 2008. SRG is
owned by Asia Retail Group (ARG), which in turn is backed by Barings Private 
Equity. A year earlier, ARG also delisted Courts Mammoth from the Malaysia bourse.
---------------------------------------------------------------------------------------------------------------

Courts Asia is a strong household brand name having an operating history 
of more than 35 years in Singapore and more than 25 years in Malaysia.
It has a unique business model which integrates Retail and Credit while 
offering a distinct value proposition for the customer. According to market
research, Courts Asia has the largest market share (about 10%) in Singapore
and the second largest market share (about 7%) in Malaysia, with 70 stores
in this two countries. It is planning to grow store network by an average of 6 
stores in Malaysia and an average of 1 store a year in Singapore over the next 
2 to 3 years. Courts Asia also seek to establish a market presence in Indonesia
with the first store targeted to open in 2014 in eastern Jakarta. 

Courts Asia had been producing good financial result over the last couple
of years with increasing net profits. It reported a net profit of $39 million
for FY 2012, up from $32 million in FY 2011 and $18 million in FY 2010.
It also intend to distribute about 30% of the current year profits after tax
for each of the periods from October 1, 2012 to March 31, 2013 and for
FY March 2014 to shareholders. I am not particularly concern about the
dividend yield but at least the company have a clear-cut dividend policy
for the time being. The main issue to me is increasing revenues and
bottom-line.

Upon listing, SRG will get $86.2 million in net proceed while Courts Asia will be
getting $43.8 million. Courts Asia will use about 91% of the proceed to expand
into Indonesia while the remaining will be use as general working capital.
This is something that I like about the company, it is planning to launch 
megastores which have retail areas exceeding 60,000 square feet in urban area
in Indonesia.I believe that this will really boost the sales figure and bottom line 
of the company when its plan take flight. 

I am sure that many readers should have bought some products from Courts
before or at least should have step into their stores. It is quite a house-hold
brand name locally and as long as it continue its business model, I believe
it should continue to be profitable. I like the fact that its CEO, Mr Terence 
Donald O’Connor and CFO, Ms Kee Kim Eng, is subscribing for the Management
Tranche at the same cost, 77cts a share, same as the public. Looking at the
recent IPOs performance and the market sentiment right now, I am still 
optimistic that company should have a wonderful debut on next Monday,
October 15. I am looking at trading range of about $1 opening and the 
price should move along 95cts-1.05 This is just how I feel about the stock
and may or may not materialise. On this note, I am giving a strong SUBSCRIBE 
for the IPO. The public application will close at tomorrow noon, so if you are
interested to grab a piece of a house-hold name, you have to make up the
decision and take action fast.