IPO..JCY ... Jan10

A large maker of HDD components, JCY is on a roadshow for a listing at a PER of between 10 and 14 times, unusually high for this industry in this part of the world.

Stocks, in the industry tend to trade at PERs below 10 times, and often trade below five times, here and in Singapore beause the profitability of HDD companies is perceived as being highly cyclical.

The offer price for JCY shares will be determined through a book building process that had yet to commence.

JCY is one of the world’s biggest makers of HDD components and would draw the interest of foreign fund managers for itself and to the sector. JCY supplies more than 50% of the base plates required by Western Digital. In world’s second largest maker of HDD.

The listing of JCY offers its major shareholders Yong Yoon Kiong, as the IPO offers will entirely be an offer for sale by him, and will not involve any issue of new shares by the company.

JCY would have a total market value of about RM4 billion if the IPO price is achieved at a PER of 11 times its projected earnings in 2010. Yong reportedly will offer 25.9% of the company’s equity for sale, and with that he will pocket a cool Rm1 billion cash from the exercise, and will still own the remaining 74.1% of JCY.

However, its earnings does not appear to be highly cyclical, having maintained a high level of profits through the global crisis of 2008/2009. It made a net profit of RM174 million in 2007, RM203 million in 2008 and RM207 million in 2009. Most companies in other industries fared worse through the crisis.