The below article is written by Mr Boyd Peters the Managing Director at Investment Company Services.
Now faced with a slowing economy at home, China's leadership is looking for new channels to sustain its appetite for growth at a time when its developing neighbours are experiencing rapidly rising demand.
"One Belt One Road" (OBOR) is a strategic Chinese Government initiative to re-install the silk sea and trade routes to export China's goods and services through the next century.
OBOR is arguably the most important economic event of our time and could sow the seeds for a new geopolitical era. Estimates of China's OBOR initiatives are as high as USD 21 trillion to support infrastructure and construction projects in OBOR countries.
Australian investors can benefit from OBOR by investing in companies exposed to this construction. In some ways these investments could be counter-cyclical as they are not exposed to commodities prices or Chinese domestic growth.
One such company that could benefit from OBOR is JC International Group (www.jcigroup.com.au) who provide an integrated, one-stop workforce sub-contracting solution to large construction projects worldwide.
In recent years, JCI has grown to become a leading Chinese company with the requisite licenses to provide these same workforce solutions to Chinese SOEs expanding construction operations. Looking ahead, JCI's main business strategy is to become a strong international construction contracting company. It is presently undertaking an IPO on the ASX to support its growth objectives.
When considering whether to invest in an IPO important features to look for include:
• Clear understanding how an ASX listing benefits them
• Commitment to Corporate Governance and transparency
• Australian chairman and Australian directors who have relevant experience
• Commitment to engage the investment community with investor relations once listed
• Attractively priced around 5-6x earnings. 10x earnings is the top end to pay
In addition to JCI some recent IPOs that tick many of these boxes included Dong Fang Modern Agricultural (ASX: DFM), the second-largest citrus grower in China, Traditional Therapy Clinics (ASX: TTC), it franchises or owns 313 health and wellness clinics, and One All International Limited (ASX: 1AL), it provides high end outdoor furniture.
Note: Applications for any IPO can only be accepted on the application form accompanying the Prospectus lodged with ASIC.
Disclosure: The author notes he intends to participate in the JCI IPO and will receive fees from the company for providing marketing and consulting services to them during and after the IPO. He has no interests in any of the other companies mentioned.
Disclaimer: This is provided for information purposes and it not to be regarded as a recommendation or investment advice. Before acting on any information you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser. Such investments noted may not be suitable for your investment needs.
