MetaX Tech is a Singapore small-cap stock, historically prone to speculation.

Yuanxu Technology is the second company to list on the Hong Kong Growth Enterprise Market (GEM) recently, indicating that the Hong Kong GEM IPO, which had been suspended for three and a half years, may have resumed its normal issuance pace.

The first company was UOB-Kay Hian Holdings, which listed on June 3, with 39,000 subscribers and an oversubscription rate of over 2,500 times, making it the most popular new stock this year. Influenced by this, Yuanxu Technology's subscription is also very hot.

1. IPO Information

2. Company Overview

Yuanxu Technology, from Singapore, was established in 2000 and is a precision engineering service provider specializing in complex precision machining and precision welding services for international companies in the semiconductor and other industries.

The company primarily provides precision machining and welding services to well-known clients from Singapore, Malaysia, the U.S., Switzerland, and other countries. Most of its clients are renowned international companies across various industries, including semiconductors, aerospace, and data storage, with whom it maintains important long-term partnerships.

In 2023, by revenue, Yuanxu Technology ranked fifth in Singapore's precision components engineering industry for the semiconductor sector, with a market share of 3.3%.

Financial data shows that in 2022 and 2023, Yuanxu Technology's revenue was SGD 39.182 million and SGD 38.769 million, respectively, with net profits of SGD 2.705 million and SGD 4.427 million during the same periods.

Yuanxu Technology's revenue comes from: precision machining services, which involve high-precision material removal to manufacture tight-tolerance parts and components; and precision welding services, which apply welding equipment and specific techniques with extreme precision, often used for small parts, tight-tolerance components, or those requiring nearly invisible welds.

From a revenue structure perspective, both precision machining and precision welding are core businesses. Among them, the higher-margin precision welding business has seen rapid growth in revenue contribution, increasing from 41.5% in 2022 to 59.9% in 2023.

Yuanxu Technology's major Client A is a key supplier to TSMC and Samsung Electronics, holding a global market share of approximately 19.5% in semiconductor manufacturing equipment. Due to highly customized products and the need for suppliers to possess a series of product-specific certifications, customer loyalty is quite high. The company has established long-term business relationships with its top five clients, averaging about 11 years.

3. Comprehensive Review

Yuanxu Technology's debt-to-asset ratios for 2022 and 2023 were 24.8% and 15.7%, respectively, indicating low and declining leverage. As of December 31, 2023, the company had SGD 9.225 million in cash and SGD 10.486 million in operating cash flow. Overall, Yuanxu Technology's financial performance is relatively healthy, making it a small but high-quality company.

Yuanxu Technology is issuing 18% of its total shares in this IPO. At the median offering price of HKD 2.69, it aims to raise approximately HKD 72.6 million. The underwriting commission is as high as 8%, with an additional 2% discretionary bonus—essentially a 'protection fee.' Small-cap Singapore stocks have historically been prone to speculative trading.

Yuanxu Technology's current margin financing is 400 times oversubscribed, and it is expected to reach 800 times, triggering a clawback to 50%. The GEM does not differentiate between Group A and B shares, with a total of 13,500 lots. Assuming 30,000 subscribers, the estimated one-lot winning rate is below 3%—worth a try.

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