Lukewarm debut by Lotte Chemical Titan

KUALA LUMPUR: Lotte Chemical Titan Holding Bhd is only one of two listings this year which saw its stock end its first trading day below the issue price.
The stock ended 1.85% or 12 sen lower at RM6.38 against the initial public offering (IPO) price of RM6.50 in its debut on the Main Market of Bursa Malaysia yesterday, despite stabilising action by IPO manager Maybank Investment Bank.
The bank acquired 17.1 million Lotte Chemical Titan shares at an average price of RM6.4718 each, which represented 37.6% of the group’s total trading volume of 45.48 million shares. The market debutante was the second most actively traded counter for the day.
Volume on Bursa Malaysia totalled 1.73 billion shares at the closing bell yesterday.
Year to date, the only other company to fall short on its debut is KIP Real Estate Investment Trust, which fell 0.5% on the first day of trading. It closed yesterday at 92.5 sen, still below its IPO price of RM1.
Commenting on Lotte Chemical Titan’s disappointing debut, Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew said he believes that low market liquidity led to the group’s weak performance.
“The (market) liquidity is quite low. At this point (4pm yesterday), we got (only) 1.35 billion shares (being) traded. That is low (in terms of) the regular standards,” Pong told SunBiz.
In addition, he said, the undersubscription of the IPO’s retail tranche displayed “chances that the demand would be low”.
Nevertheless, he said, the downward trend is anticipated to be temporary, noting that “things in the stock market go in cycles”.
“When it is very weak, there will come a time when it will recover; when it is very strong, there will come a time when it will weaken. Nothing is permanent in the stock market,” Pong said.
Speaking at the listing ceremony yesterday, Maybank Investment Bank regional head, equity capital markets Ramesh Manimekalanandan made it clear that it was the group’s decision to buy back all shares allotted to the retail and non-cornerstone bumiputra investors following the IPO revisions.
“So both of the regulators Securities Commission and Bursa Malaysia Securities Bhd have approved this and it will be implemented from July 12 to 18,” he said.
Maybank Investment is the principal adviser for the group’s IPO.
Given the lukewarm response to its listing exercise, the polyolefins producer had reduced its final IPO price to RM6.50, which was 18.7% or RM1.50 sen below the initial retail price of RM8.
The group also reduced the size of the issuance by 21.7% to 580 million shares, from around 740.5 million planned earlier. It raised RM3.77 billion from the IPO, compared with its earlier target of RM5.92 billion.
Currently it has four on-going projects, three of which are in Malaysia and Indonesia, which will be partially funded via the IPO proceeds over the next 12 to 36 months.
The group’s senior vice-president corporate planning Philip Kong said despite the lower proceeds from the IPO, the group is confident that it will be able to fund all of these expansion projects, given its strong financial position.
“As at first quarter of this year, we have RM425 million in cash, and with the IPO proceeds and our future generated funds, we are confident that we will be able to fund all these projects,” he said.
Lotte Chemical Titan’s listing is the tenth on Bursa Malaysia this year, and is the largest IPO in the country since 2012.