Petronas Chemicals IPO may oversubscribed by 3x

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Petronas Chemicals Group Berhad’s initial public offering (IPO) has been covered three times at the high end of the RM4.50-RM5.20, The Edge reported. A fund manager involved in the bidding and a banker with direct knowledge of the deal told Reuters there had been significant interest in the domestic book building exercise.

Based on current discounted retail price of RM5.05 per share (97% of institutional price), it translates into an odd institutional price of RM5.2062 per share. If the institutional price was fixed at RM5.20, the final retail price would be RM5.04 per share, which may be resulting a price difference of RM0.01 per share and that difference need to be refunded to retail investors.

In order to avoid the hassle and complication in refunding the retail price difference, it is most likely the institutional price would set at RM5.21 per share. As such, the retail price would be RM5.05 (97% of RM5.21) and no refund is necessary.

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What is the likely over-subscription rate for public non-bumi portion?

80 million Offer Shares, representing 1% of the enlarged issued and paid-up share capital of PCG are available to non-bumi Malaysian citizens, companies, co-operatives, societies and institutions.

Compared to the earlier Malaysia Marine And Heavy Engineering Berhad’s (MMHE) 16 million shares, PCG’s offer to public non-bumi portion is about 5 times more than MMHE.

MMHE’s public non-bumi portion was oversubscribed by 12.36 times, representing a total application monies of approx RM 714 million.

16 million shares x RM3.61 per share x 12.36 times = RM714 million

Assuming the application monies is double for PCG at RM1,428 million (double of RM714 million), given MMHE’s first day high debut premium of RM0.71 may attract stronger interest in PCG, this may work out an oversubscription rate of 3.53 times for PCG.

80 million shares x RM5.05 per share x 3.53 times = RM1,428 million

Based on the calculation above, there is a good chance of applying for the PCG IPO compared to MMHE, given the huge size of PCG IPO shares offered.

Update: JF Apex Securities’ research report recommends to subscribe Petronas Chemicals Group (PCG) IPO with a target price or fair value of RM5.70, which represents an upside of RM0.65 or 13%. So, make your judgment and choice is yours.

 

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