Lotte Chemical Titan IPO to raise RM5.9b gross proceeds

By PREMALATHA JAYARAMAN

Lotte Chemical Titan Holdings Bhd (LCT) plans to use a substantial amount from the RM5.92 billion expected to be raised from its initial public offering (IPO) to expand its plants’ production.

Its president and CEO Lee Dong Woo said Malaysia’s largest integrated producer of olefins and polyolefins would expand its plants’ capacity in Malaysia and Indonesia.

He said 83.2% of the IPO proceeds would be used to fund the RM15.5 billion integrated petrochemical facility in Indonesia. The expansion would boost the plant’s ethylene production up to 1,000 kilo tonnes per annum (KTA).

Lee said about 10.5% will be used for the construction of a new polypropylene plant in Johor to increase production by 200 KTA and some 3.7% to upgrade its existing napththa cracker to increase the production of ethylene and propylene as well as benzene, toluene and xylene.

Lee said this after the company’s prospectus launch in Kuala Lumpur last Friday.

LCT, which will be listed on July 11, will be Bursa Malaysia’s largest IPO since August 2012 and the largest in South-East Asia since May 2013.

It expects to achieve a post-listing market capitalisation of about RM19.7 billion.

The IPO will see the sale of about 740.5 million shares, or 30% of the enlarged issued share capital, comprising an institutional offering of 684.7 million shares and a retail offering of about 55.8 million shares, representing about 27.7% and 2.3% of the enlarged issued share capital respectively.

It also includes an over-allotment option of about 55.5 million shares, or 2.3% of the enlarged issued share capital, for purposes of price stabilisation.

The final retail price will be equal to the lower of the retail of RM8 per IPO share or the institutional price to be determined by way of bookbuilding. Lee said the company currently owns and operates 14 plants (including two crackers in Malaysia) supported by on-site facilities, including two co-generation plants, three tank farms and three wastewater treatment facilities.

LCT, he said, capitalises on the scale of its integrated production facilities in Malaysia, applies operational excellence to achieve operational stability and optimal plant utilisation, and benefits from production efficiency initiatives designed to optimise profitability in the long run.

According to him, LCT’s nameplate capacities have increased over their original capacity through debottle-necking and continuous efficiency enhancements, achieving an annual production volume of 2,703 KTA for the year ended Dec 31, 2016.

He said its total plant utilisation rate for its crackers improved from 95% in 2014 to 100% in 2016.

For the financial year ended Dec 31, 2016, he said LCT’s operating profits jumped to RM1.7 billion from RM58 million in 2014, on the back of RM8.1 billion revenue.

The company has secured five cornerstone investors, namely Permodalan Nasional Bhd, Maybank Asset Management Sdn Bhd, Maybank Islamic Asset Management Sdn Bhd, Eastspring Investments Bhd and Great Eastern Life Assurance (M) Bhd who have agreed to severally and not jointly acquire an aggregate of 136 million IPO shares, representing about 18.4% of the base offering of the IPO.

Maybank Investment Bank Bhd has been appointed as principal advisor, joint global coordinator, joint bookrunner, managing underwriter for the listing exercise.

Credit Suisse Securities (M) Sdn Bhd, Credit Suisse (Singapore) Ltd and JPMorgan Securities (M) Sdn Bhd are the joint global coordinators and joint bookrunners.

The other joint bookrunners are CIMB Investment Bank Bhd, Nomura International (Hong Kong) Ltd and the Hong Kong and Shanghai Banking Corp Ltd, Singapore branch. CIMB Investment Bank Bhd, Affin Hwang Investment Bank Bhd and MIDF Amanah Investment Bank Bhd are the joint underwriters.