Samurai 2K Aerosol

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Have not managed to get a hold of the prospectus yet but read an interesting announcement from this soon-to-be IPO-ed company:

I wonder who writes their prospectus and why they didn't realise such glaring and material mistakes

The news also mentioned they spent about $1m to raise about $2m. Was it because the shogun felt it is time for a bigger hat?

Spent 1.65mil to raise 2.35mil, and solely from private placement.
Interesting developments for this small yet fast growing company.

20 Jan 2017: Trading of shares begin.

29 May 2017: Release of a poor FY17 results. Nevertheless, a massive run-up of share price took place shortly after IPO to 40 cents level, and remained at that level even after the poor result release.

23 June 2017: Reclassification of unaudited FY17 cashflow statements, as proposed by external auditor. The unadited cashflow statement materially overstates the free cash flow generated. Share price continues its climb to 50 cents on 21 July 2017.

26 July 2017: Share price climbed to 70 cents. SGX queries trading activity. Board gave no explanation, and confirms it is in compliance with listing rules.

31 Oct 2017: Positive profit guidance released. Share price has continued to rise since last result release and is now close to $1.

10 November 2017: Release of HY18 results. Profits tripled. No dividends proposed. Share price continues its steady climb.

17 November 2017: CFO, who has been in the job for 2 years 3 months, was redesignated to be assistant of COO.

27 November 2017: Placement of 10m new shares at $1 each, enlarging share capital to 110m shares. Share price rose to more than $1.15 on 1 December.

8 December 2017: SGX queries rationale for placement, given the unutilised IPO proceeds and cash on the balance sheet. Board reiterates its points without further breakdown of expected expenditure.

27 March 2018: Share price climbed to $1.30. SGX queries trading activity. Board gave no explanation, and confirms it is in compliance with listing rules.

22 May 2018: Positive profit guidance released. Share price is at about $1.45.

28 May 2018: Release of FY18 results. Profits almost quintupled. Huge jump in receivables turnover. No dividends proposed. Share price rose to all time high of $1.75 before release of results.

Here are some questions:

1) If management can sell 9% of the company for $10m (November private placement), why sell 20% of the company for $4m (January IPO placement), just 11 months earlier? This begs more questions.

2) Does management not know that the company's earning ability, and hence valuation, will vastly improve in the next 6-12 months? If they don't, it suggests that they're not competent managers. If they do, then why didn't they wait till their earnings, and therefore valuation, is better to launch the IPO? The prospectus states that the founder has been in business since 1997.

3) Given the huge rise in profits, why was there not even a little dividend proposed?

4) Despite the huge rise in profits, FY18 OCF and FCF is negative. This is due to a huge growth in trade receivables. Can these receivables be collected?

5) Who has been buying the stock so religiously? Except for the first day of trading, volume of shares traded has been very low since IPO, with most days less than 50 lots. It jumped to 600+ lots in the pass few days, the highest in the past 12 months.

Everything may well turn out to be fine, and Samurai goes on to become a world-leading brand of paint applicator.

But I cannot comprehend these developments. And so I shall stay away.
Interesting observations Karlmarx.
Something weird is going on - regarding capital flow and share price.

Nothing related; I think I saw their product in Mr DIY retail outlet, Malaysia.
Just 3 business days after the release of FY18 results, when no dividend was recommended, management did a u-turn and proposed a dividend of $0.006 per share.

Why the abrupt change?

The dividends amount to S$617,826, which is about 20% of profit. This gives a yield of 0.375% based on a S$1.60 share price.
CFO resigns after 9 months. And left before a new hire could be found.
Samurai 1H2020 Result as at 30 Sep 2020
Rev RM44m (vs 28m)
GP  RM21m (vs 13m)
NP  RM 7m (vs  3m)
Div SGD1cents (vs nil)

Management expects that there will be continued uncertainty with regards to the COVID-19 pandemic and the recovery of the global economy. The Group will continue its efforts to tighten cost controls, enhance online and offline marketing activities, as well as develop new and innovative products to maintain its market competitiveness.

The Group’s marketing strategy plan for the USA market will be further delayed to 2H2021 due to the COVID-19 pandemic.

Stay home and stay safe, everyone.


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