1-Tues
|
Based in Zhangzhou China China Zenix Auto Int’l (proposed ZX)is scheduling an $135 million IPO with a market capitalization of $546 million at a price-range mid-point of $10.50 for Thursday May 12, 2011 |
|
SUMMARY |
|
. Largest commercial vehicle wheel manufacturer in China.
. For 2010 versus 2009 sales increased 47% to $485 million from $329 million 2009.
. But sales for the September and December quarter were down from the June 2010 quarter.
. Gross profit fluctuated the last three quarters ended December 31, 2010 from 25% in the June quarter, to 23% the September quarter, to 28% in the December quarter. For the quarters ended June, September and December 2010 after tax profit margins were respectively 11%, 8% and 11%.
. Recent quarterly after tax profit margins were respectively 11%, 8% and 11% |
|
VALUATION |
|
. Priced at 11 times earnings for the year ended December 31, 2010.
. Which seems reasonable for a low gross margin company which is going into the IPO with unimpressive quarterly sales and earnings increases. |
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
Dec 2010 year, sales/earnings |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
China Zenix Auto(ZX) |
$546 |
1.1 |
11 |
2.0 |
2.0 |
25% |
|
BUSINESS |
|
. ZX is the largest commercial vehicle wheel manufacturer in the Peoples Republic of China (PRC) in both the aftermarket and OEM market in terms of sales volume, according to the Frost & Sullivan Report. ZX designs, manufactures and sells high quality steel wheels that are widely used by most types of commercial vehicles. |
|
ZX’s product offering is one of the most diversified in the PRC commercial vehicle wheel industry. ZX currently offers more than 230 series of tubed steel wheels (which are typically used for commercial vehicles using tires that contain a rubber inner tube), tubeless steel wheels (which are typically used for commercial vehicles using tubeless tires), and off-road steel wheels (which are typically used for construction and other types of off-road vehicles |
|
COMPETITION |
|
In the China market, ZA primarily competes with domestic companies such as Shandong Xingmin Wheel, Dongfeng Motor Wheel and Changchun FAWAY Automobile Components.
In India, principal international market, ZA primarily competes with local vehicle wheel manufacturers such as Wheels India, Steel Strips Wheels and Hayes Lemmerz. |
|
In addition, there is increasing consolidation within the commercial vehicle wheel industry in the China. According to the Frost & Sullivan Report, the five largest manufacturers of commercial vehicle wheels in the PRC accounted for approximately 43.5% of the market in 2009 in terms of sales volume. |
|
Other types of commercial vehicle wheels, such as aluminum wheels, also compete with ZX’s products. ZX plans to offer its own aluminum wheels in the future, but has no experience in the production and sales of such wheels on a commercial scale. |
|
EMPLOYEES – 5,183 as of December 31, 2010. |
|
USE OF PROCEEDS |
|
Shareholders intend to sell 1.3 ADSs. ZA expects to sell 11.6 million ADSs to net $108 million. |
|
. $69.4 million for manufacturing facility expansion, with $41.5 million for the expansion of steel wheel manufacturing facilities in the Peoples Republic of China (PRC)
. ,$9.6 million for the establishment of a new steel wheel manufacturing facility in India, and aUS$18.3 million for the establishment of a new aluminum wheel manufacturing facility in the PRC
. $7.7 million for the expansion and enhancement of research and development activities in order to further broaden product offerings, including expanding research and development centers in the PRC and collaborating with leading industry experts, as well as recruiting additional trained personnel
. $4.8 million for the expansion and strengthening of PRC aftermarket distribution network and increasing the size of the sales and marketing team and the level of promotional activities in the PRC, with a particular focus on increasing penetration of medium- and small-sized cities and rural areas
. $4.8 million for the expansion of international sales in India, select countries in Southeast Asia and the Middle East, North America, Europe and possibly other markets, including through increasing sales and marketing activities internationally, expanding the network of distributors and potentially entering into strategic acquisitions or other partnerships to increase penetration of those markets |
|
. Remaining portion for working capital and general corporate purposes |
|
China Zenix Auto Int'l |
ZX, C+, 7 |
|
|
|
|
Post IPO ADS equivalents: 52mm |
|
Wheel mfg |
|
|
|
|
% change |
|
|
Zhangzhou,, China |
|
2008 |
2009 |
2010 |
2010 vs 2009 |
IPO Mkt |
|
Revenues ($mm) |
|
$282 |
$329 |
$485 |
47% |
Cap (mm) |
|
Gross profit % |
|
20% |
24% |
28% |
|
$546 |
|
Net income (loss) |
|
$20 |
$28 |
$50 |
78% |
@$10.50 |
|
Net income (loss) % |
|
7% |
9% |
10% |
|
|
|
Quarterly results |
Sep-09 |
Dec 2009 |
March 2010 |
June 2010 |
Sept, 2010 |
Dec, 2010 |
|
Revenues ($mm) |
$82 |
$101 |
$105 |
$134 |
$120 |
$133 |
|
Gross profit % |
27% |
26% |
26% |
25% |
23% |
28% |
|
Net income (loss) |
$9.1 |
$12.0 |
$10.9 |
$14.8 |
$9.4 |
$15.2 |
|
Net income (loss) % |
11% |
12% |
10% |
11% |
8% |
11% |
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
Dec 2010 year, sales/earnings |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
China Zenix Auto(ZX) |
$546 |
1.1 |
11 |
2.0 |
2.0 |
25% |
|
SCORECARD |
|
Mgt |
Market |
Market Do- |
Proprie- |
Total |
|
1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
|
20 is perfect |
|
2 |
2 |
2 |
1 |
7 |
|
