Asiaphos (IPO)

Asiaphos IPO: Asiaphos is the first China based mineral resources company to be listed on SGX, which is focused on the exploration and mining of phosphate (76% of FY12 revenue), and production of phosphate-based chemical products (24% revenue), and holds exploration and mining rights to 2 phosphate mines in Sichuan with total resources available estimated at 22.2m tonnes. China (target market for Asiaphos’ phosphate rocks) makes up ~77% of the global phosphate market, with consumption forecasted to be constant going forward to 2022. At the same time, overall growth for phosphorus derivatives (Asiaphos sells downstream products to both PRC and overseas customers) is expected to increase ~4.5% annually from 2012 to 2022. In particular, Chinese sodium triphosphate (STPP) demand in sectors such as food applications and water treatment is forecasted to exceed China’s GDP growth rate. Asiaphos’ key strengths are found in 1) mined phosphate rocks has higher phosphate content (implying cost efficiencies in production) and 2) cost efficiencies from its vertically integrated business model and 3) lower transportation cost (close proximity between mines and production facility). Of the $24.4m IPO proceeds raised, 47% is earmarked for financing the balance of its rebuilding programme, as the production facility was significantly affected by the 2008 Wenchuan earthquake; 31% of the proceeds will be used for development and expansion of mining operations. At 143x pre IPO historical P/E vs peer average of 50x and 3.9x P/B (industry: 1.8x), valuations appear daunting given the tepid industry growth prospects and its patchy earnings track record. over the past two years. Its mines and production facilities also lie within an active earthquake belt, which is a key risk factor. Offer expires at noon, 3 Oct 2013, with listing date at 7 Oct 13.