Trying to breakdown Soon Hock Enterprise Holdings IPO in less than 2 hours (My thoughts)

 

This time round it took a bit longer because this company's prospectus is some what interesting to read.

I will write the conclusion which is I don't think this is a good IPO to be subscribing to.

To sum up the company's operations will be Industrial Property Developer with an inclination to sell the units as strata.

What I think is good about the company

1) Leadership. The founder is and executive chairman is from Cogent Holdings. A company that was delisted at $1.02 and taking a look at is share price before it delisted, i would say it was well run and anyone holding it probably did not lose any money. In this sense, i think its quite remarkable actually.

2) Decent Margins. In 2023, they generating around 25% in gross margins and 11% in net margins as they managed to construct and sellout their industrial project. This remains the only meaningful thing they have done in 2022,2023,2024 

What I dislike about the company

1) Too High Gearing. Liabilities make up 90% of the company. If there is 3 red flags, i think this company would get all 3 red flags lol.

2) Interested Party Transaction (IPT). They outsource their construction work to their own company (which is fully owned by themselves). As such erm i am not sure how the margins will look for the projects moving forward.

Another interesting thing that i found out is that they have this 300 worker dormitory that is also fully leased by the same construction coy owned by the executive chairman. This lease is until 2028 January so it is a 3 years contract for $135,000 for 300 beds a month. This equates to $450 a month. If so, why are you putting it in your prospects that beds can go up to $600....the other possible dormitory location at Shaw Road is not even approved / built as well.

In my previous analysis, i estimated Westlite Toh Guan to be around $526 in 1Q 2025.

3) Concerns on Current Project Margins. Stellar@Tampines, with $326.5 million gross development value. It is not clearly stated what is the amount that has been put into developing this property. We can only guess from the below evidence.

68.6m of construction expense and 157.1m and 28.1m. Altogether adds up to 253.8m. 

Adding that selling and marketing expense in 2023 where they concluded the previous project was 11.5% , that would be erm 37.5m. 

Adding all up, if 100% sold before TOP at developmental value, the profit before tax would come in at 35.2 million. Assuming 17% tax which is what they incurred that year, profit is 29.2 million or a net margin of around 8.9%.

And then we will have to wait to see if Skye@Tuas can churn out good numbers for 2026/2027

As that project has the highest GDV / Market Value at the moment, there might be a chance we get some decent margins. I did some calculation of $95m + $138.4 (construction cost in 2026) +  40.71m selling and marketing expense. The after tax profit is around 66.3m. Pretty decent for this project if this is indeed the case.

4. Cornerstone Investor. I added this in for fun. I just read an article that Lion Global Investor is the top Singapore Fund.

I searched up the list and they are not involved in this IPO. However, they were inside the Centurion Accommodation REIT IPO.

Summary.

For a company with market capitalisation of $180.1 million post IPO, a self estimated profit of around 100 to 110 million (if things all go their way) in 2026 + 2027, i think its quite weak.

The bookrunners being Maybank and UOB makes it more funny because they would help to do the IPO instead of structuring a loan for them if the banks believe that the projects have really good margins and can sell well such that the loans can be easily paid off.

The amount of IPT can be both good and bad but its not very comfortable with me.