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Enice Holdings IPO is Surrounded by Risks

Enice Holdings IPO is Surrounded by Risks
Oct 27, 2015 By Tim Morris Tags: ENC

The Enice Holdings IPO is expected to conclude at the end of the October when shares commence listing at 40 cents per share. The ticker code will be ENC.

Are the nation’s capital investments in fibre based communications keeping pace with world standards? Five years since the National Broadband Network’s (NBN) roll out commenced, over 1.2million premises have been declared ready for service. Whilst the NBN program has helped facilitate five per cent growth in the nation’s average connection speed over the past 12 months, there appears scope for improvement given Australia’s world ranking stands at 46th.

Further down the world rankings at 92nd, China has an average connection speed of less than half Australia’s. Over the past 12 months, average connection speeds in China have contracted more than eight per cent. According to Akamai, China was one of only three nation’s in the Asia Pacific region to witness a contraction during the year.

The need for further investment into China’s communications infrastructure has spurred the coming listing of Enice Holdings. The Hong Kong incorporated technology company is focused on wireless communications hardware and services. It is principally engaged in the design and assembly of antenna products, and the provision of installation services to mobile carriers in China. Enice’s operations were founded in 2000 and the Company currently has 446 employees. 

Its initial public offer is intended to improve balance sheet health, with proceeds scheduled to reduce borrowings with the Company’s Chinese banks by approximately 50 per cent. Incentive for equity investors lays in the Company’s established profitability and growth trajectory. Enice is on course to generate its fourth consecutive period of higher revenue and earnings. Supported by a 14 year relationship with China Mobile, the Company aims to sustain the trend by expanding into new territories in China and releasing new products.

Risks surround the Company’s lumpy cash flow cycle, significant unallocated free float and challenging precedents set by other ASX listed companies holding significant operations in China. As the Company appears unwilling to comfort these uncertainties via a shareholder dividend, we anticipate the confluence of risks to stymie Enice’s capital growth potential.

Company: Enice Holdings Ltd
ASX Code: ENC
Shares on Offer: 62.5million – 95million
Listing Price: $0.40
Market Capitalisation: $103.3million -  $116.3million
Listing Date: October 30th  

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Tim Morris Author: Tim Morris Oct 27, 2015

Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.

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