The Trendlines Group (IPO)

The Trendlines Group ($0.33): Nurturing medical and agri tech startups

The Trendlines Group, an Israeli government franchised incubator for medical and agricultural technology firms, launched an IPO on SGX’s Catalist Board, which is expected to raise $25m gross proceeds.

The IPO offers 75.76m shares, priced at $0.33 each or 1.4x P/B based on its net tangible assets as of Jun '15.

Cornerstone investor for the IPO is healthcare supplier B. Braun Melsungen AG, which will be subscribing 21.5m shares or 28.4% of the offering.

The mandate of the group is incubate and invest no more than $5m each in medical and agricultural technology companies, and subsequently exit within a time horizon of six years through either a private sale or public listing.

At present, the incubator group operates via two subsidiaries, Trendline Medical and Trendline Agtech, as well as its internal innovation centre, Trendline Labs.

Trendlines has incubated 60 companies since commencing operation in 2007, of which 17 have reached commercialisation stage and are generating revenue. In addition, five were monetised through acquisitions or sold their assets to multinational corporations.

Proceeds from the IPO will mainly be used to invest in existing and new portfolio companies, as well as expand Trendline Labs and $5m will be set aside $5m to establish new incubators, including one in Singapore by 2016.

However, the group swung to a US$2.9m pretax loss in FY14 after two profitable years (FY13: US$22.9m, FY12: US$8.6m), as revenue dropped sharply to US$8.6m (FY13: US$29.7m, FY12: US$13.8m), due to significantly lower net fair value gains and write-offs from portfolio companies.

For 1H15, it reported a pretax profit of US$5.3m, after accounting for grant of options and listing expenses, on the back of US$9m revenue.

Currently, the incubator firm do not have a fixed dividend policy and plans to retain available funds for growth.

Management opines that Singapore is ideal for its listing, given its relative small size vis-à-vis exchanges such as Nasdaq and Tel Aviv Stock Exchange.

Primepartners Corporate Finance is the sponsor, issue manager and placement agent for the IPO