No spillover on IPOs from Lotte letdown


LOTTE Chemical Titan Holding Bhd’s weak initial public offering (IPO) performance is not expected to have an impact on upcoming major IPOs this year.

Analysts said the tepid response to what is to be the largest IPO listing in Malaysia in five years, was mainly the case of overpriced shares as liquidity in the stock market remains scarce.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng classified Lotte’s poor display as a one-off affair due to the company’s highend valuation and did not foresee any trickling effect arising from it.

“It could be an isolated case because it was priced on the high side. This serves as a lesson for the upcoming IPOs that they should not price their shares that high,” Wong told The Malaysian Reserve (TMR) when contacted.

Wong added that investors may have had the privilege of choice, favouring established stocks under Petronas Chemicals Group Bhd (PetChem) instead of newcomer Lotte.

“If investors see PetChem as a benchmark and the valuation range for Lotte is between RM6.50 and RM8, the market would view the former as the better choice — which is why Lotte had to cut their offering by over 20%,” he said.

The downswing of the petrochemical industry in the interim meant a listing from the industry would be a challenge, as reflected in Lotte’s revised valuation and funding targets.

Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew viewed the move to list the largest integrated producer of olefins and polyolefins in Malaysia now as “ambitious” amid lack of interest on investors’ part.

“It might be a bit ambitious to list at the moment because you require liquidity to absorb an IPO this size and generally, the amount of money in the system now is lesser. The fact that it was initially priced at RM8 made it a turnoff. Our retail investors are not keen on anything beyond RM2,” Pong told TMR.

Meanwhile, Wong said investors may be more matured this time around when it comes to investing in a major IPO com

pared to previous years. “Those days, I think investors would just be excited and quick to jump on the bandwagon when there is a big IPO. Nowadays, I think investors are more sophisticated and they do their homework (before investing),” he said.

Lotte, the petrochemical unit owned by South Korea’s fifth-largest family owned conglomerate, raised as much as RM4 billion from its IPO after pricing its shares at RM6.50 apiece — nearly 20% lower from its original RM8 offer a share.

The firm’s IPO volume was also reduced by a fifth to 580 million units from an initial offer of 740.4 million shares.

Lotte’s revised share offering exercise secured five cornerstone investors in Permodalan Nasional Bhd, Maybank Asset Management Sdn Bhd, Maybank Islamic Asset Management Sdn Bhd, Eastspring Investments Bhd and Great Eastern Life Assurance (M) Bhd that have severally and not jointly subscribed for an aggregate of 136 million, or 23.4%, of the base offering of the IPO.

Global institutional investors comprised 30% of the total demand received, Lotte said in a statement.