No Bursa probe for Ideal Jacobs

by **hlk** Tue 24 May 2011, 22:09

KUALA LUMPUR: Shares in Ideal Jacobs Malaysia Corp Bhd traded to its
intraday high of RM1.10, being 307% of its offer price of 27 sen, on its
debut on Bursa Malaysia on May 18. Yet, this has not triggered Bursa
Malaysia’s probe into the unusual price movement of the ACE Market
counter.

“This price movement is within the daily trading limit
set for an initial public offering (IPO),” an official from Bursa
Malaysia told The Edge Financial Daily yesterday. “Bursa Malaysia’s
daily trading limit for initial public offerings is set at 400% for new
listings (with offer price) above RM1, and 400% or 30 sen, whichever is
higher, for new listings (with offer price) below RM1.”

In
discharging its obligations to the market, the official said the local
stock exchange monitors trading of all securities, and where there are
instances of market offences, it will investigate and take the necessary
actions, where appropriate.

Ideal Jacobs Malaysia saw its
shares shoot up to RM1.10 in the morning of its debut on Bursa, which is
a significant jump from its IPO price of 27 sen. It retraced back to
52.9 sen at noon and finally closed at 43 sen for the day.

It
was among the top volume counters that day with some 50 million shares
transacted. It is worth noting that before the market opened that day, a
buy order was placed at 50 sen, which was 46% higher than its IPO price
of 27 sen.

Perhaps investors were intrigued by Ideal Jacobs
Malaysia’s listing as it isn’t very often that a US-based company seeks
listing in Malaysia.

Ideal Jacobs Malaysia is a 40.55%
subsidiary of US-based Ideal Jacobs Corp. The group has its roots way
back to the Great Depression.

Founded by Morris Jacob, it began
as a small printing firm in New Jersey, United States and eventually
evolved into a manufacturer of industrial labels and name-plates.
[You must be registered and logged in to see this image.]
In 1990, Andrew Conrad Jacobs became the president of Ideal Jacobs Corp and chairman of Ideal Jacobs Malaysia.

Ideal Jacobs Malaysia holds 100% of Ideal Jacobs (Xiamen) Corp and 99.99% of Ideal Jacobs Corp (Thailand) Ltd.

According
to notes accompanying the financial statement for the quarter ended
March 31, the manufacturing of industrial labels business made up 43.54%
of its total revenue, followed by the fabrication of plastic parts at
31.64% and production of laser and die-cut product at 15.71%.

It
is worth noting that Ideal Jacobs Malaysia’s public issue of 30 million
shares was fully subscribed with the two million shares available for
application by the Malaysian public oversubscribed by 315 times.

The
consensus target price of the stock is 35 sen, according to Bloomberg
data. This is one sen lower than yesterday’s closing price of 36 sen,
which gave the company a market capitalisation of RM43.2million.

There are no other listed local competitors that are directly comparable to Ideal Jacobs Malaysia.

But
Inter-Pacific Research Sdn Bhd, comparing Ideal Jacobs Malaysia with
other companies listed on the ACE Market under the industrial products
sector, said the company should be valued at about 9.5 times forward
price-to-earnings ratio (PER), or a 20% discount to its peer’s average
PER, and the fair value of the company would be 32 sen.

According
to the research house, Ideal Jacobs Malaysia’s competitive advantage
includes the sales and research and development (R&D) support from
its parent, and its business model that focuses on a high product mix
that gives it a high profit margin.

For 1Q ended March 31, the
company registered a net profit of RM371,000 on the back of RM3.78
million in revenue. Earnings per share was 0.41 sen while net assets per
share stood at 14 sen. The company has a net cash position of RM2.93
million.

According to its prospectus, Ideal Jacobs Malaysia’s IPO
would raise about RM8.1 million, of which RM1.5 million will be
allocated to build a manufacturing plant in Suzhou, China, RM1 million
to launch a new production line for engineered thermoplastic composite
products in Thailand and RM800,000 to establish an industrial label
manufacturing plant in Malaysia.

Nonetheless, the current
relative higher prices for commodities such as crude oil could pose a
threat to the company as polymer materials are commonly used as face
stock for the label manufacturing industry.

Another risk resides
in the company’s dependency on two of its major clients, namely Chinese
Global Ltd and Celestica (Thailand) Ltd that collectively make up 29.4%
of its total revenue for the financial year ended Dec 31, 2009.

According
to the financial statement for 1QFY11, China makes up the bulk of Ideal
Jacobs Malaysia’s total revenue at 70.82%, followed by Thailand at
13.97% and 11.67%.