IPO Update: T20 Holdings (TWEN) Finalizes Proposed IPO Plans

A Quick Take On T20 Holdings

T20 Holdings Pte. Ltd. (TWEN) has filed to raise $20 million in gross proceeds from the sale of its units of common stock and warrants (TWENW) in an IPO, according to an amended registration statement.

The company provides a range of energy project-related design, management and construction services in Asia.

Management is asking investors at IPO to pay an EV/Revenue multiple of 8.5x on a company with sharply contracting revenue and profits since 2020.

Given the firm’s downward trajectory, I’m on Hold for the IPO, although the low nominal price of the units may attract day traders seeking volatility.

T20 Overview

Singapore-based T20 was founded to provide energy and construction project activities for gas-fired facilities in Papua New Guinea to reduce the reliance on diesel power generation.

Management is headed by Chief Executive Officer Geoffrey Allan Lawrence, who has been with the firm since inception in 2014 and previously held various positions at Fuji Xerox, Ricoh, Toshiba and UPS.

The company’s primary offerings include:

• Contracting

• Consulting

• Engineering

• Construction

• Maintenance

T20 has booked fair market value investment of $11.4 million as of June 30, 2022 from investors including senior management and Fuato Limited.

T20 – Customer Acquisition

The firm has historically done business in Papua New Guinea, operating a 45-megawatt gas-fired power station.

The company has also developed floating storage, regasification and power generation technologies that it believes have significant application throughout the APAC region where numerous smaller islands and communities lack reliable energy sources.

T20 is also developing a geothermal energy project in Germany and is working on other potential projects in Indonesia and Australia.

Selling, G&A expenses as a percentage of total revenue have trended upward as revenues have varied, as the figures below indicate:

Selling, G&A	Expenses vs. Revenue
Period	Percentage
Six Mos. Ended June 30, 2022	18.2%
2021	13.7%
2020	5.6%

Click to enlarge

(Source – SEC)

The Selling, G&A efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A spend, was 3.9x in the most recent reporting period, as shown in the table below:

Selling, G&A	Efficiency Rate
Period	Multiple
Six Mos. Ended June 30, 2022	3.9
2021	-20.0

Click to enlarge

(Source – SEC)

T20’s Market & Competition

According to a 2021 market research report by ResearchAndMarkets, the global market for LNG regasification was an estimated 46,458 billion cubic feet in 2020 and is forecast to reach 68,292 billion cubic feet by 2025.

This represents a forecast average annual growth rate (AAGR) of 7.7%.

This expected rate of growth is almost double that of the period from 2015 to 2020.

Also, major countries accounting for regasification capacity in 2020 included the U.S., Japan, South Korea, Spain, and China.

Major competitive or other industry participants include:

• New Fortress Energy

• AES

• Hoegh LNG

• GasLog

• Excelerate Energy

T20 Holdings’ Financial Performance

The company’s recent financial results can be summarized as follows:

• Contracting topline revenue

• Reduced gross profit but higher gross margin

• Lowered operating profit

• Variable cash flow from operations.

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Six Mos. Ended June 30, 2022	$ 4,318,268	249.5%
2021	$ 9,250,397	-73.3%
2020	$ 34,623,956
Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Six Mos. Ended June 30, 2022	$ 3,934,382	7941.2%
2021	$ 8,134,012	-45.9%
2020	$ 15,021,713
Gross Margin
Period	Gross Margin
Six Mos. Ended June 30, 2022	91.11%
2021	87.93%
2020	43.39%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Six Mos. Ended June 30, 2022	$ 1,204,789	27.9%
2021	$ 3,574,090	38.6%
2020	$ 9,250,649	26.7%
Net Income (Loss)
Period	Net Income (Loss)	Net Margin
Six Mos. Ended June 30, 2022	$ 937,668	21.7%
2021	$ 2,919,285	67.6%
2020	$ 7,168,232	166.0%
Cash Flow From Operations
Period	Cash Flow From Operations
Six Mos. Ended June 30, 2022	$ 2,470,216
2021	$ 255,158
2020	$ (2,900,758)
(Glossary Of Terms)

Click to enlarge

(Source – SEC)

As of June 30, 2022, T20 had $603,104 million in cash and $6.5 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2022, was $4.3 million.

T20 IPO Details

TWEN intends to sell 3.33 million units of common stock and one warrant per unit at a proposed midpoint price of $6.00 per unit for gross proceeds of approximately $20.0 million, not including the sale of customary underwriter options.

The warrant will become immediately exercisable at a price of $7.50 per common share.

No existing or potentially new shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO (excluding underwriter options) would approximate $105.2 million.

The float to outstanding shares ratio (excluding underwriter options) will be approximately 16.5%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

Approximately $4 million for project acquisition costs for the Traunstein project, if acquired;

Approximately $4.1 million for project development costs and working capital to develop and execute for the Traunstein project; and

Approximately $7.3 million for general working capital and to develop additional projects.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not currently a party to or under threat from any legal proceedings that would have a material adverse effect on its financial conditions or operations.

The sole listed bookrunner of the IPO is EF Hutton.

Valuation Metrics For T20

Below is a table of the firm’s relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:

Measure (TTM)	Amount
Market Capitalization at IPO	$121,190,028
Enterprise Value	$105,159,924
Price/Sales	9.83
EV/Revenue	8.53
EV/EBITDA	13.89
Earnings Per Share	$0.30
Operating Margin	61.41%
Net Margin	49.97%
Float To Outstanding Shares Ratio	16.50%
Proposed IPO Midpoint Price per Share	$6.00
Net Free Cash Flow	$4,261,387
Free Cash Flow Yield Per Share	3.52%
Debt/EBITDA Multiple	0.00
CapEx Ratio	9.20
Revenue Growth Rate	249.49%
(Glossary Of Terms)

Click to enlarge

(Source – SEC)

Commentary About T20 Holdings

TWEN is seeking U.S. public capital market investment to fund continued development of its Traunstein project in Germany and for additional, unspecified corporate initiatives.

The firm’s financials have reported reduced topline revenue, lowered gross profit but higher gross margin, reduced operating profit and fluctuating cash flow used in operations.

Free cash flow for the twelve months ended June 30, 2022, was $4.3 million.

Selling, G&A expenses as a percentage of total revenue have trended higher as revenue has fluctuated; its Selling, G&A efficiency multiple was 3.9x in the most recent reporting period.

The firm currently plans to pay no dividends on its ordinary shares for the foreseeable future. Any such dividends contemplated would be required by Singapore law to be paid only out of profits.

The market opportunity for providing LNG energy services is large and expected to grow considerably in the coming years as securing adequate and cleaner-burning energy supplies grow in importance.

EF Hutton is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (64.1%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is the volatile nature of energy prices, which may affect project development cycles.

As for valuation, management is asking investors at IPO to pay an EV/Revenue multiple of 8.5x on a company with sharply contracting revenue and profits since 2020.

Given the firm’s downward trajectory, I’m on Hold for the IPO, although the low nominal price of the units may attract day traders seeking volatility.

Expected IPO Pricing Date: To be announced