CFA Society Singapore
SINGAPORE (June 21): PropNex Realty’s upcoming initial public offer (IPO) has already attracted its fair share of attention, albeit for the wrong reasons.
After poring over the preliminary IPO prospectus document lodged last Thursday, eagle-eyed observers have spotted a number of discrepancies in the group's disclosures.
The first discrepancy was the disclosure that a $5 million value was ascribed to PropNex’s business takeover agreement with Dennis Wee Realty (DWR) entered into last year.
However, during the June 12 press conference at the signing ceremony of the partnership, PropNex CEO Ismail Gafoor had said there was no monetary or equity transfer between the firms.
According to the prospectus, there was a one-time cash payment of $700,000 to DWR upon execution of the agreement.
However, payment for the remaining $4.3 million would depend on whether DWR agents continued to close deals after they were merged with PropNex.
The second discrepancy noted by observers was the difference between the FY16 unaudited revenue and profit given by PropNex to the press last year and the audited figures disclosed in the IPO prospectus.
In the prospectus, PropNex's revenue and net profit for FY16 were $245 million and $7.6 million, respectively. This was lower than the respective $278.9 million and $9.23 million reported in the media last June.
In the third discrepancy, PropNex had stated in its prospectus it has “approximately 200 teams of salespersons, with each team differing in size, ranging from approximately 10 to 500 salespersons each as their downline”.
However, observers noted this fact to be erroneous.
Team PNG, or Powerful Negotiators, led by PropNex executive director Kelvin Fong, had some 3,000 agents under its wing. This accounted for close to 40% of PropNex’s entire salesforce of 7,248 salespersons.
Observers said the high concentration of agents under a single team alone should also have been flagged under “risk factors” in PropNex’s prelim prospectus.
According to a June 1 Bloomberg report, PropNex plans to raise about $40 million from its IPO. The company is also targeting a market capitalisation of as much as $250 million, Bloomberg said, adding that the IPO shares could be priced at 62-68 cents each.
Cornerstone investors Affin Hwang Asset Management Berhad, FIL Investment Management (Hong Kong), Nikko Asset Management Asia, NTUC Income Insurance Co-Operative, Samsung Asset Management (HK) and Value Partners Hong Kong have also agreed to subscribe to a total of 50 million shares.