HARD-DISK drive maker JCY International's initial public offering (IPO) is not cheap at 13.5 times its price earnings ratio for 2010, derived from its forecast earnings at RM302.5 million, OSK Reasearch said today.
"Even if JCY beats our earnings expectations by an optimistic 15 per cent, its PER for 2010 would be 12 times, which is still relatively unattractive compared with FBM KLCI's 15.4 times the PER for 2010," it said in a research note.
The listing is expected to be the second biggest in six years.
"For a founder to let go of 30 per cent of such a quality business, rationally speaking, he would want to maximise the valuation," said the research house.
JCY is 100 per cent owned by its founder, who built up the business into one of the world's biggest hard-disk driver component manufacturers.
"We are neutral on this IPO," OSK said.
The shares offered at 13.5 times was not cheap even if its earnings for this year surpassed the estimated RM302.5 million to RM350 million, it said.
Meanwhile, ECM Libra Investment Research also said that at the RM2 retail price, the valuation was not compelling.
"Looking into financial year 2010, JCY’s prospective price earnings multiple does not look cheap at 12 times even if we assume the group can sustain its encouraging performance," ECM said.
JCY’s IPO involves offering of 530.2 million existing shares in total, comprising 470.3 million to institutions at a price to be determined via book building and 59.9 million shares to retail investors at RM2.
The final retail price will be the lower of RM2 or 95 per cent of the institutional price.
JCY reported RM356.8 million in revenue and RM56.6 million net profit for the first two months of the first quarter this year.
Based on its prospectus, almost 65 per cent of JCY's sales last year were from Western Digital while other customers include Japan's Nidec Corp and Seagate Technology. -- Bernama |
