IPOdesktop's  Instablog

Nov 8wk IPO calendar Richmond Honan Medical Properties REIT (MOB) $273mm IPO at price range mid-point of $14. Scheduled week of November 8, 2010

SUMMARY

Wants to IPO at 1.6 times tangible book value, and doesn’t specify the payout target. Seems overpriced

For example, on a compare & contrast valuation basis two fairly recent IPO REITS sell at 1.5 times tangible book value and pay (or plan to pay) in the 5% range: Campus Crest (CCG) and Piedmont Office REIT (PDM)

Other REITS that pay in the 2.3 to 3% range sell for 1 to 1.2 times tangible book: Whitestone REIT (WSR) and Hudson Pacific (HPP) both sell for 1.2 times tangible book. Excel Trust (EXL) REIT sells for 1 times tangible book.

BUSINESS

REIT focused on healthcare delivery systems, including hospitals, multi-specialty clinics and physician practice groups

DIVIDEND POLICY

100% of REIT taxable income INCOME STATEMENT

Poor six months performance for the six months ended June 30, 1010

. Total Revenues. Total revenues decreased $20,000 or 0.5% for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009

. Total Expenses. Total expenses increased by $2,197,000 or 80.9% for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009

CONFLICT OF INTERESTS

Use of proceeds to buy properties from officers & directors, not on an arm’s length negotiation

. Directors and executive officers of MOB have interests in certain of the entities that MOB will acquire in the formation transactions and have entered into contribution and other agreements in connection with such acquisitions. . MOB did not conduct arm’s-length negotiations with respect to all of the terms of the formation transactions and tax protection agreements

USE OF PROCEEDS $249mm

. $56mm to purchase real estate from Affilated Portfolio

. $39mm to purchase real estate operations from Ziegler Portfolio

. $109mm to repay debt for initial properties

. $45mm to pay formation costs, for corporate & working capital

. $1mm to Robert W. Baird for advisory fee

Wave2Wave Communications (WAV): $120mm market cap at price range mid-point. Offering 1/3 of the company in the IPO. Provides broadband communications services to business buildings.

SUMMARY

Overpriced because

(1) Sales declined for the six months ended June 30, 2010 vs. the year earlier six months.

(2) For the six months ended June 30 WAV generated operating losses of $7mm loss vs a $1.2mm loss for the comparable year earlier period.

(3) Negative price-to-tangible-book value of –3.3, which indicates the balance sheet is highly leveraged and constrains growth.

BUSINESS

WAV believes it will be one of the first companies in the United States to focus on deploying in-building HFW networks in commercial buildings.

USE OF PROCEEDS

$37mm

. $20mm to repay debt & separation note . Balance for working capital

Nov 8wk IPO calendar

Noah Holdings Limited (NOAH) $84mm IPO
with a market cap of $547 at price range mid-point of $10.
Scheduled for Wednesday, November 10, 2010

NOAH Valuation Metrics

SUMMARY
Distributes wealth management products in China.  Impressive results for the nine months ended September 30.  Compared to the year earlier period
. Sales increased 260%
. Income increased 500%
. For the six months ended June 30, 2010 average transaction value per client increased to US$1.0 million from US$0.5 million

With a P/E of 41 (annualizing the September three months) NOAH should attract considerable investor interest, because there is room for substantial growth.

Conclusion:  based on recent quarterly results NOAH should be a good IPO trade, at least.

BUSINESS
. Distributes wealth management products to the high net worth population in China.
. Wealth management products originated in China, and included primarily fixed income products, private equity funds and securities investment funds.
. Has over 300 relationship managers in 28 branch offices

MARKET
China’s private wealth management services industry is at an early stage of development, characterized by low market penetration, increasing client awareness, fragmented market and strong growth potential.

According to the Heading Report, approximately 80% of China’s high net worth individuals managed their wealth and made investment decisions on their own
. Independent wealth management service providers form a small market segment within the overall wealth management services industry in China.
. This segment is fragmented, with only a handful of prominent wealth management service providers that have gained critical mass and can provide comprehensive and client-oriented services.
. According to NOAH Independent wealth management service providers are in a better position to provide independent and objective advice to high net worth clients as they are not affiliated with any financial institutions or product providers.

METRICS
Registered clients
Despite the global financial crisis starting in 2008, the cumulative number of registered clients increased from 3,089 as of December 31, 2007 to 6,606 as of December 31, 2008, and to 9,641 as of December 31, 2009 and further to 12,353 as of June 30, 2010
Active clients
Active clients increased from 926 as of December 31, 2007 to 1,065 as of December 31, 2008, and to 1,235 as of December 31, 2009.
For the six months ended June 30, 2010, the number of active clients was 779, as compared to 615 for the six months ended June 30, 2009
Average transaction value per client
. Increased from US$0.2 million) in 2007 to US$0.4 million in 2008 and to RMBUS$0.7 million in 2009, representing a three-year CAGR of 102.3%.
, For the six months ended June 30, 2010, NOAH’s average transaction value per client was US$1.0 million as compared to US$0.5 million for the six months ended June 30, 2009.

COMPETITION
The wealth management services industry in China is at an early stage of development and is growing rapidly.  Principal competitors include
• Commercial banks.
.  Many commercial banks rely on their own wealth management arms and sales force to distribute their products, such as China Merchants Bank, China Minsheng Bank and China Everbright Bank.
. NOAH believes that it can compete effectively with commercial banks due to a number of factors, including an undiluted focus on the high net worth market, client-centric culture and institutionalized services, and  independence, which positions NOAH better to provide wealth management recommendations and services and to gain clients’ trust, according to NOAH.
• Trust companies.
Because a substantial portion of products that NOAH distributes are fixed income trust products, NOAH competes with trust companies with in-house distribution functions.
• Independent wealth management service providers.
A number of independent wealth management service providers have emerged in China in recent years.

USE OF PROCEEDS
$75mm
•  15.0 million to set up new branch offices and expand our coverage network, including hiring additional relationship managers, to carry out geographic expansion strategy to target cities in high growth and relatively more affluent regions
• $15.0 million to update IT infrastructure;
• $15.0 million for capital contribution to funds of funds formed by NOAH; and
•  remaining amount for general corporate purposes, including funding potential acquisitions of complementary business

NOAH Valuation Metrics