JARAMA/iStock via Getty Images
A Quick Take On Prime Skyline Limited
Prime Skyline Limited (PSE) has filed to raise $15 million in an IPO of its ordinary shares, according to an F-1 registration statement.
The firm provides building envelope design, consultancy and construction services in various Asian countries.
Given PSE’s contracting topline revenue in a growing industry, I’m on Hold for the Prime Skyline IPO, although the low nominal price of the IPO may attract day traders seeking volatility.
Expected IPO Pricing Date: To be announced.
What Is Prime Skyline?
Singapore-based Prime Skyline was founded to assist property developers with designing and constructing the building envelope portions of residential and commercial buildings.
Management is headed by co-founder, Chairman and CEO Sonny Bensily, who has been with the firm since inception in 1995 and was previously a civil engineer at WED Engineers & Constructors and New York Plastic Company Pte.
The company’s primary offerings include:
-
Consultancy
-
Design
-
Construction
-
Supply
-
Maintenance
The company currently provides its services in Singapore, Sri Lanka, Myanmar, the Philippines and Brunei and seeks to expand its operations to other Asian countries.
As of December 31, 2021, Prime Skyline has booked fair market value investment of $2.2 million as of December 31, 2021 from investors including Focus Point Developments Limited.
Prime Skyline’s Basics
The firm pursues project bidding opportunities with commercial clients as well as government clients.
The building envelope industry in Singapore is relatively concentrated with only a few dominant participants.
In 2019, management said the company ranked as the fourth largest such contractor in the region.
Selling & Marketing expenses as a percentage of total revenue have risen to 0.4x as revenues have decreased, as the figures below indicate:
|
Selling & Marketing |
Expenses vs. Revenue |
|
Period |
Percentage |
|
2021 |
0.4% |
|
2020 |
0.3% |
(Source – SEC)
The Selling & Marketing efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling & Marketing spend, was negative (24.5x) in the most recent reporting period. (Source – SEC)
According to a 2022 market research report by Market Reports World, the global market for building envelope products and services was an estimated $158 billion in 2021 and is forecast to reach $202.5 billion by 2028.
This represents a forecast CAGR of 3.6% from 2022 to 2028.
The main drivers for this expected growth are an increase in demand for improved building envelope solutions for greater energy efficiency purposes.
Also, the Asia Pacific region is expected to produce one of the fastest growth rates for demand over the coming years.
Major competitive or other industry participants include:
-
Nam Lee Pressed Metal Pte. Ltd.
-
LHL International Pte. Ltd.
-
Mero Asia Pacific Pte. Ltd.
-
YKK AP Singapore Pte. Ltd.
Prime Skyline’s Financial Performance
The company’s recent financial results can be summarized as follows:
-
Contracting topline revenue
-
Lowered gross profit and gross margin
-
Increasing operating profit
-
Reduced cash flow from operations
Below are relevant financial results derived from the firm’s registration statement:
|
Total Revenue |
||
|
Period |
Total Revenue |
% Variance vs. Prior |
|
2021 |
$ 24,738,132 |
-8.2% |
|
2020 |
$ 26,944,424 |
|
|
Gross Profit (Loss) |
||
|
Period |
Gross Profit (Loss) |
% Variance vs. Prior |
|
2021 |
$ 3,203,882 |
-21.9% |
|
2020 |
$ 4,100,604 |
|
|
Gross Margin |
||
|
Period |
Gross Margin |
|
|
2021 |
12.95% |
|
|
2020 |
15.22% |
|
|
Operating Profit (Loss) |
||
|
Period |
Operating Profit (Loss) |
Operating Margin |
|
2021 |
$ 667,454 |
2.7% |
|
2020 |
$ 272,534 |
1.0% |
|
Net Income (Loss) |
||
|
Period |
Net Income (Loss) |
Net Margin |
|
2021 |
$ 74,954 |
0.3% |
|
2020 |
$ (137,379) |
-0.6% |
|
Cash Flow From Operations |
||
|
Period |
Cash Flow From Operations |
|
|
2021 |
$ 14,083,492 |
|
|
2020 |
$ 15,077,505 |
|
As of December 31, 2021, Prime Skyline had $52,915 in cash and $33.6 million in total liabilities.
Free cash flow during the twelve months ended December 31, 2021, was $13.9 million, driven by a sharp increase in accounts payable.
Prime Skyline’s IPO Details
Prime Skyline intends to raise $15 million in gross proceeds from an IPO of its ordinary shares, offering 3.75 million shares at a proposed midpoint price of $4.00 per share.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $60.4 million, excluding the effects of underwriter over-allotment options.
The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 30.0%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.
Management says it will use the net proceeds from the IPO as follows:
for paying the start-up costs of prospective projects, which will generally include project insurance fees, costs of materials, subcontracting fees and surveying service fees for certain start-up works to expedite our organic growth and expand our business scale by undertaking more sizeable building envelope projects in Singapore and other Asian countries, such as the Philippines and Sri Lanka.
for paying the cash collateral for performance bonds on prospective projects.
to partly repay a five-year bank loan in the principal amount of S$1 million with a due date of June 2025 and a five-year bridge loan from the same bank in the principal amount of S$5 million with a due date of January 2026.
to acquire servers, computers, software and other accessories to enhance our BIM design capabilities and upgrade our IT equipment and systems.
to repay our Controlling Shareholder for an interest free loan made to us for the purpose of paying the expenses of this offering and the Nasdaq listing.
for working capital and other general corporate purposes.
(Source – SEC)
Management’s presentation of the company roadshow is not available.
Regarding outstanding legal proceedings, management said it knows of no material proceeding against the company.
The sole listed bookrunner of the IPO is ViewTrade Securities.
Valuation Metrics For Prime Skyline
Below is a table of relevant capitalization and valuation figures for the company:
|
Measure [TTM] |
Amount |
|
Market Capitalization at IPO |
$50,000,000 |
|
Enterprise Value |
$60,359,730 |
|
Price / Sales |
2.02 |
|
EV / Revenue |
2.44 |
|
EV / EBITDA |
90.43 |
|
Earnings Per Share |
$0.01 |
|
Operating Margin |
2.70% |
|
Net Margin |
0.30% |
|
Float To Outstanding Shares Ratio |
30.00% |
|
Proposed IPO Midpoint Price per Share |
$4.00 |
|
Net Free Cash Flow |
$13,914,701 |
|
Free Cash Flow Yield Per Share |
27.83% |
|
Debt / EBITDA Multiple |
31.33 |
|
CapEx Ratio |
83.44 |
|
Revenue Growth Rate |
-8.19% |
(Source – SEC)
Commentary About Prime Skyline’s IPO
PSE is seeking U.S. public capital market investment to pay down debt, fund its corporate growth initiatives, new project bidding opportunities and geographic expansion.
The company’s financials have generated lowered topline revenue, reduced gross profit and gross margin, growing operating profit but less cash flow from operations.
Free cash flow for the twelve months ended December 31, 2021, was $13.9 million, due to a sharp increase in accounts payable.
Selling & Marketing expenses as a percentage of total revenue rose as revenue decreased; its Selling & Marketing efficiency multiple was negative (24.5x) in the most recent reporting period.
The firm currently plans to pay no dividends and intends to reinvest any future earnings back into the company’s growth initiatives.
The market opportunity for providing building envelope construction services is quite large but expected to grow at a moderate 3.6% CAGR over the coming years.
ViewTrade Securities is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (66.0)% since their IPO. This is a bottom-tier performance for all major underwriters during the period.
The primary risk to the company’s outlook is the rising cost of capital environment and global slowdown, which may delay projects while increasing the cost of doing business.
Additionally, U.S. investors would only be owning a part of a Cayman Islands registered company and would not own interests in the operating subsidiaries directly. The company may be subject to country-based restrictions on capital movement and dividends.
As for valuation, management is asking investors to pay an EV/Revenue multiple of 2.4x for a company that is producing negative revenue growth.
Given the firm’s contracting topline revenue in a growing industry, I’m on Hold for the Prime Skyline IPO, although the low nominal price of the IPO may attract day traders seeking volatility.
Be the first to comment