Bullish outlook for two IPOs

KUALA LUMPUR: Despite the sluggish performance of initial public offerings (IPOs) in major markets, investors and analysts are generally bullish on the IPOs of MSM Malaysia Holdings Bhd and Eversendai Corp Bhd next week.

Analysts said the IPOs were expected to be well-received despite the perceived lack of quality offerings on the market recently

They said the two IPOs were “likely to garner attention” of large institutional investors given its size. “There's also a sheer diversity of companies being listed, which gives investors a better choice to diversify their portfolios,” an analyst said.

OSK Research head Chris Eng said MSM and Eversendai might be considered “small” to foreign investors and as such were unlikely to be affected by regional sentiments.

However, he said Eversendai would have to compete for funds not only with MSM but also Bumi Armada.

“We feel positive about MSM given its strong government ties, defensive business model and leading position in the Malaysian sugar industry. The fact that its shares are in demand and it has just reported a strong jump in profits points to a good debut,” Eng said.

MSM's net profit for the first quarter ended March 31 soared 416.5% to RM62.2mil from a year ago, mainly due to increase in sales and higher prices of refined sugar products.

Revenue for the quarter rose to RM503.17mil from RM497.75mil.

“The positive sentiment could be attributed to the better quality of these soon-to-be listed companies which have strong financial track record,” the analyst said adding that the recent strong financial results posted by MSM would attract investors.

He added that investors' appetite for these mega IPOs appeared to be returning after a dismal performance from few ACE counters recently.

MClean Technologies Bhd and XOX Bhd have been underperforming since it got listed. MClean made its debut on the ACE Market last month at an IPO price of 52 sen. The counter closed at 25.5 sen yesterday, half its IPO price. XOX fell 35% on its debut to 52 sen from its IPO price of 80 sen. A day before listing, the mobile virtual network operator announced it made a net loss of RM1.67mil for the quarter ended March 31, 2011. The counter continued to slide, closing at 41 sen yesterday.

“Not all the newly-listed companies are seeing bad performances in their stock prices. The perception is there because a few of the recent listings are not doing very well.

“But Focus Lumber Bhd, Boilermech Holdings Bhd, Asia Media Group Bhd and Benalec Holdings Bhd are performing well. So, it also boils down to the company,” said a local fund manager.

Analysts said Prada SpA and Samsonite International IPOs on the Hong Kong Stock Exchange did not get the type of reception they were looking for. Prada's shares were traded flat on their debut on the Hong Kong stock market yesterday. Samsonite, which fell 8% on its Hong Kong debut last week, has recovered its losses and was trading at HK$14.58 early yesterday - slightly higher than its listing price of HK$14.50.

Nevertheless, analysts did not expect the regional sentiments to affect the listing of MSM and Eversendai.

Year-to-date, Bursa Malaysia has received 16 new companies. Besides Eversendai and MSM, other mega IPOs this year are Bumi Armada and UOA Development Bhd.

Bumi Armada is expected to be listed this year while Old Town Bhd announced its plan to list on Bursa Malaysia's Main Market on July 11.

Eversendai IPO's institutional offering had amounted to more than 2.5 times the 202.04 million shares on offer to investors under the bookbuilding exercise, while the public portion was 7.3 times oversubscribed. The final institutional price has been fixed at RM1.70