New Listing UMW Oil & Gas set to lure interest

by **hlk** Thu 31 Oct 2013, 18:01

Business & Markets 2013
Written by Jeffrey Tan of theedgemalaysia.com
Thursday, 31 October 2013 16:34
A + A - Reset
KUALA LUMPUR (Oct 31): UMW Oil & Gas Corporation Bhd, to debut
tomorrow on the Main Market of Bursa Malaysia amid encouraging outlook for
offshore drilling in Malaysia and Southeast Asia, is set to lure investor interest.
While UMW O&G has fixed its IPO price at RM2.80, JF Apex has set a fair
value of RM3.15 for the stock and Public Investment Bank Research has given
it a fair value of RM3.03.
HwangDBS Vickers Research has given a target price of RM3.20 with a 14%
return upside, based on the growth potential of UMW-OG that has no direct
comparable peer in Malaysia.
Hence, it is likely the stock will be trading above its IPO price of RM2.80 at
opening calls tomorrow.
Based on IPO price of RM2.80, UMW-OG’s IPO would be the largest exercise
in Malaysia this year, with its RM2.36 billion offering having attracted interest
from international and Malaysian investors alike.
The institutional portion of its initial public offering (IPO) of over 500 million
shares, which formed the bulk of UMW O&G’s new public issue, had been
oversubscribed by about 55 times.
The company’s IPO was backed by cornerstone investors. Among them are
RHB founders Tan Sri Abdul Rashid Hussain and Tan Sri Chua Ma Yu, both
are still prominent market players.
The IPO comprised an offer for sale of up to 231.38 million existing shares in
the firm and a public issue of 611.8 million new units.
According to JF Apex Securities, UMW O&G’s IPO is also backed by cornerstone investors namely EPF, PNB, Tabung Haji and KWAP and
other local and foreign funds, apart from Rashid and Chua.
The research house said UMW O&G has a strong position in Malaysia, with 21% and 36% shares in drilling and workover markets
respectively.
JF Apex said the market is expected to grow by 33% from last year to 2018.
Public IB, in a note yesterday, said given the growing exploration and production activities, the offshore drilling market is potentially
benefiting UMW O&G as a rig owner and operator.
As the drilling and oilfield service provider is the first Malaysian owner and operator of jack-up drilling rigs, it has become one of the market
leaders in the provision of offshore drilling services and oilfield services.
But Public IB research analyst Nuraida Mohd Ali said she has given a ‘neutral’ call on UMW O&G.
However, she pointed out that possible re-rating catalysts could come from intense drilling activity, focusing on younger asset base and
strong contracted backlog.
She noted currently the group is planning to expand its asset base to accommodate potential needs.
“As at June this year, contracted backlog totalled approximately RM1.47 billion backed by improved charter rates,” she said.
UMW-OG is a 55% subsidiary of Bursa-listed UMW Holdings Bhd, which is a 51% subsidiary of PNB.