Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

Impro Precision Industries / Equity Capital Markets

The <a href="https://www.smartkarma.com/entities/impro-precision-industries" target="_blank" data-smartkarma-citation="entities:26779:1" rel="noopener">Impro Precision Industries (1286 HK)</a> IPO application commenced on the 18th of June 2019 and is expected to end by 12:00 noon, 21st June 2019, on the Stock Exchange of Hong Kong("SEHK"). Established in 2004, Impro is one of the fastest growing one-stop precision solution providers in China. The IPO price range is between HKD2.8 and HKD3.3 per share, while the IPO deal size could be around HKD1,032m, assuming a price of HKD3.05 (the mid-point of the proposed Offer Price range), with no over-allotment option being exercised.This insight covers Impro Precision’s background, its business model, key strengths, growth prospects, and risks. We have also analysed the financial performance and position of the company, and its valuation based on the offer price range. Based on our analysis, we think the company could see significant medium to long term upside. Impro’s continuous growth in investment casting and high precision casting, along with its aim to be a ‘one-stop solution’ provider, is likely to cement its position in the market. Growth across diversified end-markets combined with its leading market position and rapid customer base growth will be key to sustaining growth in the long run. As of now, we think the company is a steady one with diversified services that are robust enough to fend off competition in the market. The company, if successful in the growing end markets, is likely to trade at a FY1PE of 11.4x and an EV/EBITDA multiple of 6.7x.<div class="content-caption">Deal Specifics of Impro’s Global Offering</div><table class="table table-striped"><tbody>
<tr><td colspan="2">Details:</td></tr>
<tr>
<td>Application Period</td>
<td>June 18th, 2019 - Noon, June 21st 2019</td>
</tr>
<tr>
<td>Price Determination Date</td>
<td>June 21st 2019</td>
</tr>
<tr>
<td>Result Announcement Date</td>
<td>June 27th 2019</td>
</tr>
<tr>
<td>Dealing in Shares commence on</td>
<td>9 am June 28th 2019</td>
</tr>
<tr>
<td>Expected IPO price per share:  </td>
<td>Between HKD2.8 and HKD3.3</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td>333m shares</td>
</tr>
<tr>
<td>No. of International Placing Shares</td>
<td>
 
299.9m shares
</td>
</tr>
<tr>
<td>No. of HK Offer Shares</td>
<td> 33.3m shares</td>
</tr>
<tr>
<td>Underwriters: </td>
<td> Morgan Stanley Asia Limited、BOCI Asia Limited、GF Securities (Hong Kong) Brokerage Limited、AMTD Global Markets Limited、DBS Asia Capital Limited</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td>Approx.HKD1,016m (based on Median)</td>
</tr>
<tr>
<td>Major Shareholder  </td>
<td>
 
Impro Development which is 100% owned by Mr LU
</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td>Between HKD5,133 m – HKD6,049m</td>
</tr>
<tr>
<td>Use of Proceeds</td>
<td>
* HKD361.3m (40%)- Capex for capacity expansion especially in PRC and Mexico;
* HKD271.1m (30%)- repay interest bearing borrowings;
* HKD180.7m (20%) - finance potential acquisitions;
* The balance of HKD90.4m (10%)- general corporate purposes.
</td>
</tr>
</tbody></table><div class="content-remarks">Source: Company Disclosures</div>

The Impro Precision Industries (1286 HK) IPO application commenced on the 18th of June 2019 and is expected to end by 12:00 noon, 21st June 2019, on the Stock Exchange of Hong Kong("SEHK"). Established in 2004, Impro is one of the fastest growing one-stop precision solution providers in China. The IPO price range is between HKD2.8 and HKD3.3 per share, while the IPO deal size could be around HKD1,032m, assuming a price of HKD3.05 (the mid-point of the proposed Offer Price range), with no over-allotment option being exercised.This insight covers Impro Precision’s background, its business model, key strengths, growth prospects, and risks. We have also analysed the financial performance and position of the company, and its valuation based on the offer price range. Based on our analysis, we think the company could see significant medium to long term upside. Impro’s continuous growth in investment casting and high precision casting, along with its aim to be a ‘one-stop solution’ provider, is likely to cement its position in the market. Growth across diversified end-markets combined with its leading market position and rapid customer base growth will be key to sustaining growth in the long run. As of now, we think the company is a steady one with diversified services that are robust enough to fend off competition in the market. The company, if successful in the growing end markets, is likely to trade at a FY1PE of 11.4x and an EV/EBITDA multiple of 6.7x.Deal Specifics of Impro’s Global Offering
Details:

Application Period
June 18th, 2019 - Noon, June 21st 2019


Price Determination Date
June 21st 2019


Result Announcement Date
June 27th 2019


Dealing in Shares commence on
9 am June 28th 2019


Expected IPO price per share:  
Between HKD2.8 and HKD3.3


Number of Shares for IPO:
333m shares


No. of International Placing Shares

 
299.9m shares



No. of HK Offer Shares
 33.3m shares


Underwriters: 
 Morgan Stanley Asia Limited、BOCI Asia Limited、GF Securities (Hong Kong) Brokerage Limited、AMTD Global Markets Limited、DBS Asia Capital Limited


IPO base deal size: 
Approx.HKD1,016m (based on Median)


Major Shareholder  

 
Impro Development which is 100% owned by Mr LU



Expected market cap after IPO:
Between HKD5,133 m – HKD6,049m


Use of Proceeds

* HKD361.3m (40%)- Capex for capacity expansion especially in PRC and Mexico;
* HKD271.1m (30%)- repay interest bearing borrowings;
* HKD180.7m (20%) - finance potential acquisitions;
* The balance of HKD90.4m (10%)- general corporate purposes.


Source: Company Disclosures

Impro Precision: The One-Stop Precision Solutions Provider Seems to Have Modest Upside