Sheng Siong Might Be Best IPO of 2011

In order to entice investors to sign up for its initial public offering (IPO), which is being launched on Friday, Sheng Siong is dangling a juicy carrot in the form of a big dividend.

The family-run firm, which operates Singapore’s second-largest grocery retail chain, is paying out up to 90 per cent of its net profits this year and next.

Based on last years net profit of $42.6 million, that could mean a large payout for shareholders, a yield this year of more than 8 per cent, based on some back-of-the-envelope estimates.

Sheng Siong is expecting that this will attract investors to subscribe to its mainboard IPO, from which it could raise net proceeds of $62.6 million. Brothers from the firm’s founding Lim family, Hock Chee, Hock Eng and Hock Leng will also receive about $48.2 million as they pare down their stakes during the listing, said Sheng Siongs prospectus lodged on Thursday.

Sheng Siong is selling 351.5 million shares in this regard, consisting of both new shares and vendor shares currently belonging to the Lim brothers.

The shares will be priced at 33 cents each. About 15 million will be available to retail investors in the public tranche. The public offer will open at 9am on Friday and close at noon on Aug 15. Separately, 336.5 million shares will be sold to larger, institutional investors via share placements.

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