Week 50: Portfolio Drifts Down As CAH, GMG Sold Down

Went for my company's Christmas dinner last night at the Mandarin Oriental's Melt The World cafe. We did not get the ala carte but chose the buffet menu which was very popular with everyone from the office. I remember going for a few rounds at the food station myself. However, I guess that the bill would be very expensive as it was close to a hundred dollars per person before the charges!

The portfolio was not as happy as I was last night. Compared to the previous week, the portfolio pared about $530 as a result of the sell down of several counters. China Animal Healthcare, which had fared so well last week, so a sell down of its shares from a high of 41.5 cents to close 39.5 cents, as investors took profit. GMG Global also lost 2 cents in trade.

The spotlight for the past few weeks have really been the stellar performance of Amtek Engineering and STX OSV. Despite critical comments from others and myself, the stock has performed much better than the first few days of listing, with the re-listing at $1.13 and the shipbuilder at $1.12. Interestingly, while their shares were initially falling - below a dollar for Amtek and 80 cents for STX OSV - due to poor sentiment, there was plenty of stabilisation trades.

From my limited understanding, stabilization trades are trades carried out to ensure that the IPO price does not fall too much due to open market selling. The opposite will be the over allotment option which allows the vendor or the issue manager to sell more shares, if they see that there is as strong demand for it.

Both Amtek and STX OSV have also recently posted good results. Amtek's earnings for the first quarter of its financial year doubled to $12 million on the back of a 11 per cent increase in revenue. STX OSV revenue was up by 6 per cent for the first nine months of its financial year, with the ship builder turing around to record a profit of NOK 740 million (approx SGD 162 million) from a loss of NOK 40 million.

2011 should see more IPO in the local market. This is contingent on how the proposed merger between ASX and SGX pans outs. In the unlikely event that the deal goes through, we could see more Australian companies list here to tap liquidity, Whether there will be anymore S-Chips coming to town is another question. But the lesson I have learned from my poor calls on IPOs, is that we should not under estimate the strong hands behind the scene. They have the ability to keep a stock from falling underwater through their sheer financial resources. Meanwhile, I will try my best to keep my mouth shut. Lol.

STX OSV: Recap On IPO

Unlike the IPO guru lurking in the forum of SI by the name of Palawan, I would have to say that I got it wrong with STX OSV. Since listing on the Singapore stock exchange earlier last month, while wobbling initially, it has gained 25 percent on the back of positive announcements such as contract wins.

Shortly after listing, it announced that it won contracts for the manufacture of 4 PSVs, Rolls-Royce design, worth a total of NOK1.3billion. It has also announced that it won a contract for one PSV under its on in house design.

Interestingly, Goldman Sachs bought close to 9 million shares as part of a stabilization exercise at prices raning from 78 to 79 cents.

STX OSV's third quarter results are posted on SGX website and it can be read for those interested here

STX OSV To IPO at $0.79 per share

It is always funny how an European shipbuilder comes here to raise cash. I am guessing that Oslo may have too many people aware of the situation that is going on, given there proximity to the North Sea vessel market.

As you can read from the newspapers, the shipbuilder intends to raise $257.3 million by selling and placing out shares at $0.79 a piece. I always look at IPOs with disdain. STX OSV is no exception because it is priced at slight more than 2 times its NAV (even after IPO). Moreover, the vessel market really peaked last 2 years. So what we can see here is that earnings that have come in may be exceptional, and that there still is a supply glut. The latter means that newbuild orders will be fewer or postponed, until the excess vessels can be taken off the market.

About STX OSV (More here)
 

We are one of the major global designers and shipbuilders of offshore and specialized vessels used in the offshore oil and gas exploration and production and oil services industries. Headquartered in Norway with approximately 9,000 employees worldwide as at June 30, 2010, we operate nine strategically located shipbuilding facilities,including fi ve in Norway, two in Romania, one in Brazil and one in Vietnam. Our technological know-how and innovation coupled with our global operations ensure access to the fastest growing oil exploration markets. Our core business is the design and construction of complex and highly customized offshore and specialized vessels including platform supply vessels (“PSV”), anchor handling tug supply vessels (“AHTS”) and advanced offshore subsea construction vessels (“OSCV”). In addition, we operate a design subsidiary which develops commercialized designs with high market acceptance by our customers, including the most commonly used design for PSVs of more than 4,500 deadweight tons (“DWT”)1. Our expertise and track record in constructing complex and highly customized offshore and specialized vessels have earned us recognition from industry players, including our customers. We have built strong relationships with our customers including companies that operate under the brand names of DOF, Farstad Shipping, AP Møller- Maersk, Island Offshore, Solstad Offshore, “K” Line Offshore, Petroleum Geo-Services, Aker Oilfi eld Services and Rem Offshore. According to RS Platou, as of August 31, 2010, we have approximately 30.8% market share of AHTSs of more than 20,000 brake horsepower (“BHP”), approximately 18.0% market share of PSVs above 4,500 DWT, and a market share of approximately 6.6% for selected types of OSCVs2.