June 10

Tricklestar IPO: 7 Things You Need to Know about It

On 3 June 2019, Tricklestar Ltd has opened an invitation to subscribe IPO shares at S$ 0.26 per share. Its IPO placement document can be downloaded here – Tricklestar Ltd’s IPO Placement Document. The application of its shares is scheduled to end on 14 June 2019 and the shares would be listed on 18 June 2019.

Unfortunately, there is no public offer for this IPO. That said, I have gone through the prospectus and would like to share my own findings in this article. Without further ado, here are 7 key things to know about Tricklestar Ltd:

#1: Business Model

Tricklestar Ltd designs and sells energy-saving products which include Advanced Powerstrips, load controllers, energy meters & monitors and surge protectors in the United States. Over the last 3 years, Advanced Powerstrips had remained as the main contributor of revenues to Tricklestar Ltd as it has accounted for more than 95% of the group’s revenue during the period.

 

Figures in US$ ‘000 in unless stated otherwise

Year

2016

2017

2018

Advanced Powerstrips

8,500

9,958

12,688

Others

394

363

153

Tricklestar Ltd’s Group Revenue

8,894

10,322

12,841

% Advanced Powerstrips / Group Revenue

95.6%

96.5%

98.8%

Source: Tricklestar Ltd’s Placement Document

#2: Financial Track Record

Tricklestar Ltd has recorded higher revenues for the past 3 years. This has lifted the company from a net loss of US$ 0.26 million in 2016 to having net profits of US$ 1.97 million in 2018. Its adjusted earnings per share (EPS) had increased to 2.41 US cents in 2018, from a negative 0.31 US cents in 2016. The profit growth was contributed by an increase in sales and a dip in administrative expenses.

Figures in US$ ‘000 in unless stated otherwise

Year

2016

2017

2018

Revenues

8,894

10,322

12,841

Shareholders’ Earnings

(256)

647

1,968

Earnings per Share (US Cents)

(0.31)

0.79

2.41

Return on Equity (%)

-6.30%

15.67%

38.30%

Source: Tricklestar Ltd’s Placement Document

 

#3: Balance Sheet Strength

As of 31 December 2018, Tricklestar Ltd has zero long-term borrowings and has US$ 5.14 million in shareholders’ equity. Thus, it has zero gearing ratio. Besides, it has US$ 10.9 million in current assets and US$ 6.0 million in current liabilities. Thus, it has a current ratio of 1.80.

Year

2016

2017

2018

Gearing Ratio (Total Borrowings / Equity)

0.0%

0.0%

0.0%

Current Ratio (Current Assets / Current Liabilities)

1.93

1.99

1.80

Calculated from Data Sourced from Placement Document of Tricklestar Ltd

 

#4: Utilization of Placement Proceeds

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Tricklestar Ltd intends to raise S$ 3.90 million in gross proceeds from placement shares. Out of which, the company intends to utilise it via the following:

  • Marketing: S$ 0.4 million
    Tricklestar Ltd intends to expand its presence in the United States by increasing its marketing and distribution network and further develop its online platform.
  • Product Development: S$ 1.0 million
    Tricklestar Ltd intends to develop a portfolio of next-generation energy-savings products which are ‘smart’ and ‘connected’ and are able to interact with other ‘smart’ and ‘connected’ systems such as motion sensors, temperature sensors, and light sensors and to automate the switching both ‘on’ and ‘off’ of electrical products and appliances based on user habits and needs. Currently, it develops electric clothes dryer accessory product and intends to launch it in Q4 2019.
  • General Working Capital Purposes: S$ 1.0 million
  • Listing Expenses: S$ 1.5 million

 

#5: Management

Upon the listing of placement shares, the major shareholders of Tricklestar Ltd are as follows:

No.

Major Shareholders

Direct Shareholdings (%)

1

CircleBright Ltd

50.9%

2

Harald Weinbrecht

8.3%

3

Bernard Christopher Emby

8.1%

4

Powertech Industrial Co. Ltd

4.1%

5

Law Cheok Chin

3.3%

Source: Tricklestar Ltd’s Placement Document

 

Bernard Christopher Emby is ultimately its largest shareholder as he holds 8.1% direct shareholdings and indirect shareholdings of 50.9% of CircleBright Ltd. He is appointed as the company’s Executive Chairman and CEO.

Gunananthan A/L Nithyanantham is a substantial shareholder of Tricklestar Ltd as he has stakes in CircleBright Ltd. Gunananthan sits as a non-independent non-executive director of Tricklestar Ltd.

 

#6: Risks

Tricklestar Ltd is subjected to concentration risk as it is dependent on a handful of customers for its revenue and one independent manufacturer for the supply of its products.

Tricklestar Ltd had derived 86.1% of its total revenues from five major customers in 2018 and has sourced its products from one main supplier, Powertech Industrial Co. Ltd (The 4th Largest Shareholder of Tricklestar Ltd).

In 2018, 88.3% of total purchases of Tricklestar Ltd is from Powertech. As such, its financial results are greatly dependent on the handful of customers and as well as Powertech in the future.

 

Year

2016

2017

2018

% of 5 Biggest Customers / Total Revenues

79.8%

88.1%

86.1%

% of Powertech / Total Purchases

81.2%

84.6%

88.3%

Source: Tricklestar Ltd’s Placement Document

 

#7: Valuation

After its placement of 15.0 million shares at 26 Singapore Cents, Tricklestar Ltd would enlarge its number of shares to 81.8 million shares. Thus, it has a market capitalization of S$ 21.3 million.

In 2018, Tricklestar Ltd has recorded 3.28 Singapore Cents in earnings per share (EPS) and 11.49 Singapore Cents in net assets per share, calculated by using the exchange rate of S$ 1.36 per US Dollar (based on its Latest Practicable Date). As such, the offer is valued at P/E Ratio of 7.93 and P/B Ratio of 2.26.

Tricklestar Ltd has adopted a dividend policy to pay out not less than 50% of its net profit after tax (PAT) in dividends to reward its shareholders. Therefore, the company would be paying out a minimum of 1.64 Singapore Cents in dividends per share (DPS) if it is able to maintain its EPS at 3.28 Singapore Cents in future years to come. This equates to 6.3% in dividend yield per annum.

Conclusion:

Tricklestar Ltd has recorded improvements in financial results and maintained a healthy balance sheet for the last 3 years. However, its financial performance in the future is dependent on the few major customers and Powertech.

Given its zero-debt balance sheet, investors may question the need of an IPO. This is especially so when the company is seeking gross proceeds of only S$3.9 mil and nett S$2.4 mil after deducting $1.5 mil expenses. The expenses amount to almost 38% of the total proceeds!


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Tags

Tricklestar, Tricklestar ipo


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