Bumi Armada-Should secure a handsome premium

Some recent remarks on the Bumi Armada listing.

Some called it crafty-the way the IPO created an an “artificially high demand” for the company’s shares amongst institutional investors in lieu of its flotation onto the Main Market of Bursa Malaysia this month,

Market talk has been rife that Bumi Armada’s IPO has garnered strong interest from foreign and local institutional investors, with institutional offers  oversubscribing by 5.6 times on the first day of bookbuilding

Under its IPO, Bumi Armada is offering 878.54 million existing and new shares, or about 30% of the company’s enlarged issued and paid-up ordinary share capital, and the IPO is expected to raise RM2.8bil at a retail price of RM3.15.

Existing shareholders of the company, mainly Ombak Damai Sdn Bhd, Wijaya Sinar Sdn Bhd, Wijaya Baiduri Sdn Bhd and Karisma Mesra Sdn Bhd, are selling a total of 234.28 million shares in this exercise while there will be 644.26 million new shares up for sale.

The offer for sale comprises institutional offering for Bumiputra investors approved by International Trade and Industry Ministry (MITI) while from the public issue, only 79.86 million shares will be for retail investors including directors of Bumi Armada and its eligible employees.

With the company having secured cornerstone investors to buy a total of 300 million shares, representing 10.2% of the enlarged issued and paid-up capital of the company, some analysts says that the remaining portion left for institutional investors is small.

“From the shares up for offer under the IPO, only some 18% or 160 million shares are available to institutional investors under the booking building exercise as 34% of the shares up for sale have been secured by cornerstone investors, about 38% falls under MITI’s approval for Bumiputra investors and the balance for retail investors.

The cornerstone investors include Great Eastern Life Assurance (Malaysia) Bhd, Permodalan Nasional Bhd, HwangDBS Investment Management Bhd, Prudential Fund Management Bhd, Hong Leong Assurance Bhd, Guoline Capital Ltd and Asia Fountain Investment Co Ltd.

With a potential market capitalisation of over RM9bil at an indicative retail price of RM3.15, the analyst says there will be an appetite among institutional investors wanting to buy into the company on its first day of trade.

“This naturally creates a strong demand for its shares (in terms of volume traded) and will likely see its share price close much higher on its first day of trade, as we saw for stocks like Petronas Chemicals Group Bhd and MSM Malaysia Holdings Bhd,” he pointed out.

With FY2011 price-earnings ratio (PER) of 26 times, the analyst expects the listing of Bumi Armada to provide a catalyst for a re-rating of the oil and gas sector and adds that it could become a FTSE Bursa Malaysia KL Composite Index (FBMKLCI) stock.

For the financial year ended Dec 31 2010, the Malaysia-based international offshore service player posted total revenue of RM1.2bil and net income of RM351mil, compared with a turnover of RM732.1mil and net profit of RM277.4mil for FY09.

Bumi Armada provides offshore services via four business units, which include floating production, storage and offloading (FPSO), offshore support vessels (OSV), transport and installation services (T&I) and oilfield service, as well as through two support units - engineering, procurement and construction and fleet management services.

So, I think a premium is in the offing for this stock.

Picture Bending

Yes, this has become an art. Enjoy!

Oldtown- So Little Coffee to go Around

Oldtown Berhad has completed its balloting. The results have shown that even the bumi portion has been oversubscribed by more than 3 times. As for the public portion, almost little chance even for one drop of coffee.From the ballot table, my chance is one in eleven.

Well, after reading some investment bank report that said there is a 25% upside to this issue, I took on another risky venture by going for yet one more wild Bill Hickok outing.

My forays.

UOA Development is an unmitigated disaster. Not all the King's men including UOA Australia, UOA Berhad and good ole EPF could do anything for its current melee. Went through the floor just like Rumpelstiltskin! Today it is shuddering at RM2.25 after losing 37 sen.

Then we have Eversendai. Did not lose but got candy cash. Too heavy,those steel structures, methink!

Yeah and missed the big one-MSM.

So,whether I get Oldtown or not, I do not fret too much because I believe that there are just too many IPOs going around at this juncture in time. The good one is obviously Bumi Armada.

May just concentrate on this one-lah

Eversendai-A Partial Drip Dip

Oh yes, Eversendai almost got clobbered on opening day with a low of RM1.71 and a high at RM1.82.  Imagine a cent above issue price  to institutions!

Lunch close saw it at a feeble RM1.74 with sellers aplenty and bargain hunters trying to drag down the price further. Looks like a gravity way here, Datuk Nathan!

At this rate, it will be sad to actually succeed in any public balloting. It is no longer a worthy effort to subscribe IPOs as premium seems razor thin even when analysts are expecting it to have at least a 20% premium.

Looks like the only IPO worth subscribing now is Bumi Armada.

Eversendai closed at RM1.72 for a 2 sen gain. Epic catastrophe!

IPOs-Sauces, Dips and Gravy

Yes, as the sukuk got a tremendous ovation in the international market yesterday, shares on Bursa are again pushing the envelope to all time high. The worries on the Greek sovereign debt issue is also fast ebbing.

So, what's in store for IPOs in Malaysia?

The last 6 months had seen stocks with made mediocre premiums to super ones like Malaysian Sugar Manufacturers. Today it still has a huge premium of more than RM1.30; while others failed.

Let us  look at those on the ACE board. Most could barely scrap through with any premium.  Case in point is XOX which declined to 36% in value on the first day of listing. It has yet to show any recovery. Smartag did super well. Focus Lumber  continue to have a premium of 19 sen today while Century Soft has lost 24 sen. Mclean has lost half of its IPO price, sinking to a low 25 sen.

Those who had fair returns include Petronas Chemical, Focus Lumber,Benalec and Berjaya Food.

And those which disappoint immensely must include UOA Development which succumbed to selling pressure the first day. Who has been selling is still a 64,000 dollar question. This counter, despite, EPF,  UOA Australia and UOA Berhad's market purchases is still off the mark. At RM2.27, it has still to get claw back 35 sen to its listing price of RM2.62.

The few new shares after MSM include Eversendai, Oldtown and Bumi Armada. If the market continues to see sunshine, Oldtown should see at least a premium of 25sen above its issue price of RM1.25. For Eversendai, due to its overseas exposure, it may fetch medium value. Bumi Armada will be the one to watch. Issued at RM3.15, it should be a stock to offer good premium.

So, which stocks are sauces;which are dips and which are gravy?

Without doubt, MSM  and Smartag  are gravies while Focus Lumber is a sauce-spicy but yet sweet.

UOA is definitely a drippy dip!

Eversendai-The Qatar Nexus Potential

Eversendai Corp Bhd, en route to a listing on Bursa  tomorrow seems to have a favoured nexus to Qatar, winning more contracts from the Qatar Foundation. This time it is for the Nakilat shipyard project in Qatar worth a RM165 million.

Eversendai will be involved in the construction of the main super yacht finishing hall and energy centre building.

This is the second contract it has won from Qatar Foundation for the shipyard project. Last year, it was awarded Phase 4, worth slightly over RM100 million, which it had completed.

Eversendai  indicated that it is eyeing more jobs in Qatar as the country prepares to host the FIFA World Cup in 2022. This is the mother lode for sure.

Qatar plans to spend some US$30 billion (RM91 billion) on infrastructure development for the event.

For the shipyard contract, Eversendai expects to finish the job by June next year.

"This is a huge shipyard project. For phase 4A itself, we will use about 7,000 tonnes of steel structures and 60,000m2 of covering linings," said Nathan, the founder and MD.

Year-to-date, Eversendai has won contracts worth RM520 million, increasing its order book to RM1.6 billion.

It is also bidding for RM1.5 billion worth of infrastructure, high-rise building and power plant projects in Southeast Asia, India and the Middle East.

Will Eversendai received a warm welcome on the Bursa tomorrow like MSM or be given 'a cold day in Hell' just like UOA Development?

Let us see the finicky public reaction tomorrow.

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