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March 22wk IPOs -- analysis plus numbers

|Includes: Calix, Inc. (CALX), HTHT, MXL

IPOs, week of March 22, 2010
China Lodging is ‘IPO Pick of the Week’

Five companies have a chance together to add $2.4bb market cap to the stock market


  • Alma Marine Limited (AAM)
At the price range mid-point of $20, AAM is priced 9% above tangible book value.
Shipping offers a a way to participate in stabilization & growth of the worldwide economy.  Two segments:  dry bulk and oil transport.  Aftermarket IPO performance is disappointing, more so for crude oil tankers than dry bulk shipping, see below.

The two recent IPOs are trading lower than their IPO price
. The oil tanker comparable Crude Carriers priced at $19, 5% above tangible book value, and traded March 19 at $16.57, down 13%
. The dry bulk comparable Baltic Trading priced $14, 10% above tangible book value, and traded March 19 at $13.35, down 6%
Based on the above, why would any investor be interested in yet another shipping company, Alma Marine, when it is price 9% above tangible book value, with a dividend’s limited to 25% of Available Cash for Distribution, with the comparables trading less than their IPO price
  • Calix Networks (NYSE:CALX)
. Mature industry, customers not growing very much. Customers include 13 of the 20 largest U.S. Incumbent Local Exchange Carriers, or ILECs.
. Relatively low 33% gross margin
. Dec qtr’s rev jump -- which produced the only significantly profitable qtr ever -- may not be sustainable.  And December quarters are historically strong in any case.  At the beginning of the third quarter of 2009, two of the largest customers merged.  Following the merger, this customer increased its orders.
. Seems expensive – if the December qtr’s results are annualized the P/E ratio is still 39, which is high given the above observations
  • China Lodging – IPO Pick of the week
. Based on an industry report HTHT generates the best numbers among economy hotel chains in China
. The most direct competitor is 7 Days Group (NYSE:SVN), which IPO’d November 19, 2009 at $11 and is now $10.40
. HTHT is priced at a discount relative to 7 Days Group’s for three ratios: Price-to-Sales, P/E, Price-to-Book Value
The founder also founded (CTRP, $10bb market cap) and Home Inns (HMIN, $1.3bb market cap).  CTRP will own 8% of HTHT purchased at the IPO price, post-IPO
  • First Interstate Bank (NASDAQ:FIBK)
    Regional bank

. Relative flat revenue, loan losses increasing
. Profitable but margins are declining based on loan losses
. Post IPO liabilities are almost 10 times book value
  • Maxim (NYSE:MXL)
Only last two quarters profitable.  Annualized & applying an appropriate tax rate, the P/E is 77, higher than any of the competitors.  Price to book value is also higher
. Product line seems to be spread across too many segments
. Maxim appears to be positioning itself for a buyout from a larger competitor

See the numbers in IPOreport March 22wk

Disclosure: none