The subscription rate will reflect investors’ interest in IPOs and confidence in the counter and its management
pic credit: reservoirlink.com
RESERVOIR Link Energy Bhd will become the latest IPO listing on Bursa Malaysia since the country went into a lockdown on March 18 to contain the Covid-19 pandemic.
Hopefully, it will kick-start the IPO market which has gone into temporary hibernation after Polydamic Group Bhd was listed on the LEAP (Leading Entrepreneur Accelerator Platform) Market on March 23.
Reservoir is scheduled to be listed on July 15 and will be the eighth listing year-to-date.
The exchange’s leadership had forecast some 40 new listings this year, but the virus may have put a dent on the figure.
The timing of the Reservoir listing will be a litmus test of sorts to gauge investor sentiments towards IPOs now, and in particular, towards companies involved in the oil and gas (O&G) sector which has had a dreadful year so far due to bearish supply-demand fundamentals.
So, Reservoir’s shareholders’ move to proceed with the IPO is a brave one. How they engage potential subscribers to the shares on offer within a short period of time will be key as many investors will no doubt be concerned with the company’s income prospects.
Major O&G producers’ earnings have been hit hard by lower selling prices and impairment made worse by the lockdown and cut in capital expenditure. Many have resorted to downsizing their headcount as well.
Reservoir’s prospectus clearly states that a prolonged period of low energy prices will have a negative impact on its business prospects.
Some 88% of its revenue is earned in Malaysia from the production sharing contractors operating here and the remaining from Mauritania.
On the positive side, if appealing enough to some, selling Reservoir’s shares might not be too difficult as liquidity in the market remains good despite the volume of securities, traded on a daily basis, starting to ease in the past week from historic highs, with the correction in the market pretty much over.
The well services provider is substantially owned by Pansar Bhd and aims to raise RM23.42 million from selling some 88 million shares at 41 sen a share in this IPO exercise on the ACE Market to fund its business growth and strengthen its finances.
Reservoir ED Thien Chiet Chai stated in a release yesterday that RM10 million from gross proceeds of the public issue would be utilised for the purchase of well testing equipment. Balloting is scheduled for July 3.
The subscription rate will reflect investors’ interest in IPOs and confidence in the counter and its management.
Reservoir’s listing would also set a benchmark for prospective listings to prepare for their IPOs in this post-Covid-19 world.
Bhupinder Singh is the corporate desk editor of The Malaysian Reserve.