China Track Limited (Proposed ASX Code: CTC)

The main operating entity of the Group, Fujian WM, is an independent manufacturer and supplier of aftermarket replacement undercarriage parts and components for use in crawler-type construction equipment. Its products can be used on various types of machinery such as excavators, bulldozers, and drillers, which are widely used across industries, including the mining, construction, civil engineering and agriculture industries. The group has an experienced management team, high quality standards, and recognised technology and know-how and R&D. China Track competes with the aftermarket businesses of the OEMs (who supply parts and components for use on their own equipment) as well as other independent suppliers of undercarriage components, many of which are also based in China, such as Kunshan Pacific, Tushan Construction, Yantai Fuye Machinery Group and Dalian Shenglong Machinery Co.

Offer Details:The prospectus provides investors with the opportunity to participate in the initial public offerings of new shares in China Track, a company incorporated in Victoria. Total capital to be raised is expected to be $40,000,000 which will be the maximum subscription with the Issue Price of $0.80 per share. The Offer costs are expected to total between approximately A$3.7 million (minimum) to A$4.3 million (maximum). It is assumed that the Offer costs are deductible to the company for tax purposes over five years, resulting in deferred tax assets of A$1.1 million (minimum) and A$1.3 million (maximum). The Company intends to grow its business by building a stronger value chain, by increasing the working capital. The targeted dividend pay-out ratio is between 40-60% of statutory NPAT and the estimated unfranked dividend yield is up to 6%. China Track currently holds 16 patents and a High-Tech Enterprise Certificate granted by the Chinese government. The group is committed to its own research and development projects as well as partnership initiatives with industry partners and universities in order to have continuous and systematic innovation.

Higher Expenses and higher ROE: China Track’s R&D expenditures in 2016 were around $1.89 million; and this figure is expected to increase to $2.5 million in 2018. China Track’s operations are subject to PRC laws and other regulations. The first half of 2017 reflected a revenue of $35,954,000 AUD whereas 2016 reflected a total full year revenue of $68,284,000 AUD. There was an increase of 9.3% in the half year revenue over prior corresponding period, which was primarily attributable due to an increase in the sales of key product categories including supporting wheel and Guide wheel products. The group had demonstrated a high return on equity of about 47% in FY16, and expects to be on track going forward.

The ownership structure of China Track when the offer will be completed will entail Wode Investment Limited holding 44.40%, and Best Scenery Investment Limited holding 5.60% of the total shares issued. The tax consequence of any investment in the shares will depend upon an investor’s particular circumstances, and applicants should obtain their own tax advice prior to deciding whether to invest or not. The offer is expected to close by 11 January 2018.  China Track is exposed to a global market estimated at approximately $7.3 billion. Fujian WMT’s production capacity and costs are affected by its ability to obtain a stable and sufficient supply of raw materials at a reasonable price. These raw materials are subject to significant price fluctuations caused by external factors, including but not limited to, government policy changes and price competition. The Company’s brand image is well recognised and accredited by both domestic and international clients. Due to an inadequate protections of Intellectual Property rights in China, there is a risk of counterfeit products. As a result, the Company’s brand image may be exposed to some level of risks. It will be worth a watch as the group aims to use the entire proceeds for growth.


Use of Funds (Source: Company Reports)
 

Eden Health Industry Holdings Limited (Proposed ASX Code: ETK)

Eden is the ultimate parent company of the Eden Group which includes Sichun Yidun Biotechnology Development Co. Ltd, the entity responsible for the Group’s Chinese operations. Located primarily in the Sichuan Province, People's Republic of China, the Group's Chinese operations are a modern agricultural technologically based enterprise, whose main focus involves the cultivation and sales of kiwifruits and related products. Thus, the group is sets its operation in an industry which is based on China and Australia economy mutual development.

Nascent Stage: The operations include discovery, development, manufacturing and sales of kiwifruit related deep-processing products, including kiwifruit wine and kiwifruit tablets. Moving forward, the group will continue to invest into the research and development of high quality kiwifruit related products. Eden is expected to list in March 2018 and the targeted capital to be raised is $20,000,000 at an issue price of $0.25 per share. Bluemount Capital (WA) Pty Ltd (L) is the underwriter for the same. In addition to its Chinese based operations, upon completion of the offer, the company will invest into two Australian companies, Pure Aussie Made Products Pty Ltd and Reed Holdings Australia Pty Ltd, in order to gain access to Australian made products which carry a strong reputation for quality in China. In the long term, the Company will continue to look for collaboration opportunities for kiwifruit growth in Australia. Although economic conditions in China now look bleak, the kiwi industry looks an interesting watch. Investors might want to wait for any key positive catalysts for this particular case.
 

Podium Minerals Limited (Proposed ASX Code: POD)

Expects to benefit from commodity scenario: Podium Minerals Limited is an unlisted exploration and resources development company focused on platinum group metals, gold and nickel-copper sulphides. Their core projects are located within the mining leases in the mid-west region of Western Australia. The unique geology of the mining leases includes a 15 -km strike of identified near surface PGM-Au mineralisation in Parks Reff and defined geophysical targets for nickel-copper sulphides. The Company has successfully acquired and secured the tenure of the tenements covering the entire Weld Range Complex and this includes the consolidation of a substantial database of historical exploration work. Podium Minerals is currently proposing to undertake an initial public offering in conjunction with its acquisition of the Rum Jungle Project (from AssetOwl) with an aim to take admission to ASX. Through the IPO, POD is planning to raise a capital of $6,608,765 for a share price of $0.20 each and it is expected that the offer will be closed by 12 January 2018 and it would be underwritten by Patersons Securities Limited. It is important to note that POD is able to make business from development of mineral assets and aims to use most of the proceeds for growth. We also expect the group to benefit from the booming commodity scenario.

These IPO’s might look interesting at the moment, but a prudent approach needs to be undertaken for a sufficient understanding of the risks involved in investing in the above. The growth prospects are yet to be unveiled fully looking at the current set of information.

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