[SINGAPORE] Buoyed by success in the pre-owned car market, Vin’s Holdings (VH) has sought an initial public offering (IPO) to fuel the next stage of its development with investments in IT and infrastructure.
The Singaporean automotive group is expected to list on the Singapore Exchange (SGX) Catalist board on Apr 15 – the first IPO for SGX since November 2024 – with net proceeds of S$4 million after expenses, through the issue of 20 million placement shares at S$0.30 apiece.
Galvin Khong, VH’s executive director and chief executive officer, said that the group aims to use the proceeds of the listing to grow its automotive business organically. He added that it is also working on its own enterprise resource planning (ERP) system that will integrate artificial intelligence.
Old to new school
The younger Khong said that one aim of the listing is to build on the group’s recent success.
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“We saw robust growth back in 2021 to 2023, (and) we thought that it could be a good time to further that growth. We decided early last year to set (the IPO) in motion,” he noted.
A listing would raise not only funds but also the profile and branding of the company, he added. “More people will know about us, they will have more confidence in dealing with a company that is listed… there’s more trust. In the car industry, trust is a major issue outside of authorised distributors.”
VH’s revenue increased to S$106.4 million in the 2023 financial year from S$75.4 million in FY2021, while profit increased to S$3.3 million from S$2.5 million over the same period.
The group was able to capitalise on used-car sales during this period, which saw new-car sales stall as Certificate of Entitlement (COE) supply dwindled and premiums climbed.
While the CEO declined to provide figures on the group’s car sales numbers citing competitive concerns, VH’s vehicle sales revenue increased to S$88.6 million in FY2023 from S$65.7 million in FY2021, with the majority contributed by used-car sales.
VH’s finance segment also benefited, as it offers loans to used-car dealers for purchasing their stock – floor-stock loans – as well as hire-purchase loans to consumers. In the same period, financing services interest income increased to S$6.5 million from S$3 million.
Looking ahead
Most of the company’s revenue is still generated from vehicle sales. For the nine months ended September 2024, it reported a total revenue of S$83.7 million, of which vehicle sales contributed S$67.5 million, and service income accounted for S$8.5 million. Financing and interest income stood at S$5.7 million and rental income was S$2 million.
But in the next few years, the industry expects a situation opposite to that between 2021 and 2024.
COE supply will increase in the near future and premiums could moderate, with the demand and prices for used cars following suit.
Galvin Khong contends that there will be a gradual shift, partly because, since February 2023, the Land Transport Authority’s calculation of COE quotas is based on the average of the preceding 12-month period, rather than the six months before.
COE premiums will not “drastically drop” and consumer interest will shift slowly, but not entirely to new cars, he explained. “(In the next few years)… I feel that the pre-owned car market has the most potential.”
VH will be more prudent in the areas of rental and loans, he added, but it will continue to focus on growth in the areas of used-car sales and after-sales.
It will open a showroom – its fifth facility in Singapore – in MacPherson by June this year, which will add to an existing showroom/office as well as a main workshop in Sin Ming, another showroom in Jurong, and an accident-reporting centre in Kranji.
Of the IPO proceeds, S$2 million will be funnelled into digital transformation and IT efforts, S$1.2 million into infrastructure expansion for showrooms, workshops and after-sales services, with the remaining S$800,000 for general working capital.
The ERP system, which is being developed in-house, will serve the entire group and improve its efficiency and deliver insights across business segments.
“Eventually one of the major things we want to bring in is business intelligence as well as artificial intelligence, which will help (us) analyse data, (and) give us more business insights,” said the CEO.
Such a system would improve all aspects of the business, including by giving VH the ability to tailor specific solutions for clients, as well as being provided guidance on anything from wholesale car purchase prices to stock replenishment and so on. “There’re many, many things that we can try to do when we have that data in one place; (this) can give us better cost savings and help (us) improve margins,” he added.
The younger Khong stressed that the system, which began development in early 2024, is a “long-term project” and is expected to take at least two to three years to complete.
Private placement
The IPO’s placement price of S$0.30 per share is some 43 per cent higher than the company’s net asset value per share as at September 2024, implying a high level of optimism in the company’s prospects.
That is despite the constrained nature of Singapore’s car market, and the fact that the group has not indicated any solid plans for overseas expansion as yet.
As the company is not an asset play, a fairer value would be to compare the company’s revenue or profit base, noted Galvin Khong. “With a price-to-earnings ratio of 11.7, we feel it is attractively priced and there is still room for growth.”
The group also has considerable debt, with a net debt balance of S$84.2 million as at September 2024.
The CEO explained the high gearing as part of the nature of the automotive sales business. The group’s own stock of cars, its dealer stock of cars and consumer hire-purchase loans are all backed with the vehicles as collateral.
There is also the fact that the placement is private, with no shares offered to retail investors. “The most straightforward answer is efficiency… We feel that the placement approach will give us a more stable, long-term shareholder base (that has) the same direction or mindset as us,” he said.
While the group “values retail-investor participation” and may expand its shareholder base in the future, it is not considering opening the offer to retail investors as yet.
