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Chelsea IPO


By: Marvin Germo | August 3, 2017

Chelsea Logistics is in the house! We have another IPO in the next few days and as of this writing the market has received the company quite well as Chelsea Logistics is already 3x oversubscribed! I personally am not too keen about the stock and the listing but I think there are some notable points that could bring the stock up over the short term because of sentiment and the popularity of Dennis Uy. Please study this company very well if you want to invest in it as this is not like WILCON or other consumption based businesses that we have seen in the past. This post and uploaded Facebook Live video will feature some of the things that I like about the company and the things that I don’t like so much about it. Hope this helps you to make the right decision in your investment. At the end of the day, it’s your money and you need to make a firm decision whether to buy or avoid the stock specially that the stock is new and technicals won’t be able to help you.

For other IPO videos and articles of the more recent IPOs you may check out the following: PIZZA, CLI and WLCON.

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Here are some items I mentioned in the video:

1. What I like about the Chelsea Logistics:

Story: This company will ride the “Dennis Uy man of the hour” storyline. His success in Phoenix Petroleum is what is creating a lot of buzz around investors. In my travels to meet different investors, I have seen people compare him to Injap Sia and what he has done with Mang Inasal and Double Dragon. The positive sentiment also comes from the fact that he is from Davao and the closeness he has with the new administration is what is causing investors to think that he will do well in the next 5 years. 
IPO Proceeds:
 Majority or the cash generated from this would go to expansion, which is quite good. As compared to other companies in the past months where it just went to debt repayment and to the shareholders.
Industry: The industry where Chelsea is in has grown at a rate faster than our GDP. The sector will also reap the benefits of enhanced economic activity.
Sister Companies: Because the stock is pretty much a Dennis Uy company, it will reap the advantages of getting most of the projects of Phoenix and 2GO. This already gives them a stable stream of income for the mid to long term.
Dividend Policy: For passive investors, the company has pegged a 20% dividend policy of the prior year’s recurring income.

2. What I don’t like about the Chelsea Logistics:

Income is not increasing each year: You can check the video for more details on the numbers but I am not a fan of companies who don’t have increasing net income. I want a steady growth rate on its earnings despite increased operational spending.
ROE is below my threshold:
 Again more details on the video but I like a company that has an ROE of above 10%. This is something that the company has not done in the past 3 years from the data that they disclosed.
Debt: The company has a relatively high debt.
Expensive: From its listing price of 10.68, the stock looks a bit expensive with and EPS of (.10) it gives us a P/E of 106.8x.

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