Buying a Stock: MRSGI and IDC

Before buying a stock, knowing its book value per share provides me a basis to determine whether the price I am paying for the stock is not overpriced. Such information is provided by PSE Edge. For example, you can check the book value per share of DNL by looking at its financial report. As of September 30, 2015, its book value per share is 1.69. Though in a downtrend, buying it at its current price at 8.80 is still expensive. If you divide its current price by its BVPS, you will arrive at 5.20 as the price to book ratio per share. Of course, there are other numbers to consider such as the company's balance sheet, earnings, and cash flow. And besides, with the good reputation of the company, many buyers consider DNL's market price still cheap. They consider it part of their long-term value investing in a growing company. 

Take another example. This time, let us look for PX. Based on its financial report as of September 30, 2015, its book value per share is 5.45. Compare it to its current price at 4.95 and compute its price to book ratio per share and you will have 0.90. Immediately, you will see PX is a bargain. But many avoid this stock simply because the mining sector particularly a gold stock is in a downtrend due to the price of gold in the world market and other regulations imposed by the government on the mining sector. 

How about IPOs? How can you determine if the price you are paying is not overpriced? This is my primary concern in this article particularly the two recent IPOs: MRSGI and IDC. If you are to check PSE IPO list, you will see that the offer price for MRSGI is 6.10 and for IDC is 4.20. 

In MRSGI's prospectus, you can find the same price, but in the case of IDC, its 3.60. On their IPO debut, MRSGI's starting price was 3.99 and IDC remains 3.60. MRSGI ended its first trade with a 0.25% increase at 4.00 while IDC with 17.22% increase at 4.22. At present, they are trading at 3.83 and 3.86 respectively. What puzzles me about these two stocks is the information provided in their prospectuses related to their prices prior to and during their IPO. Here's MRSGI's number:

   

There you can see that MRSGI's price as of June 30, 2015 was 1.27 described as Net Tangible Book Value per Share (NTBVPS). After the offer, the pro-forma NTBVPS was 2.28. And then the final price described as "dilution to investors in the offer" was 3.82. 

Now my question is, where did MRSGI get the 6.10 offer price posted at PSE IPO list and found in its prospectus? Why is there such a big discrepancy between 3.99 as starting price on its IPO debut and 6.10 as posted at PSE? Is this the standard format in doing IPO? If it is, how come IDC did not follow such format on its debut day and followed instead the 3.60 price given in the prospectus? 

Someone said that MRSGI was actually discounted on its IPO day. Really? If it was, how come its underwriters were selling on the first trade? Is it not because the pro-forma NTBVPS of MRSGI is far below than its 3.99 offer price? 

Let us turn to IDC. In the case of IDC, there are two prices given as its NTBVPS as of June 30, 2015: 0.50 and 0.39. Which one is true? The Pro-forma NTBVPS after the offer is 1.14. The dilution to investors is 2.46. 

  

Now my question, where did IDC get the 4.20 posted at the PSE? If MRSGI right now is trading at 3.82, which is the price labeled as "dilution to investors," is it possible that the 3.86 current price of IDC is still overpriced and that the stock could also go down to that "dilution to the investors" price at 2.46?