It almost caught investors by surprise when UOA Development Berhad share trading opens with no premium at its institutional price of RM2.60 on its first listing day at Bursa Malaysia. At once, UOA share price slipped to its lowest at RM2.48 or 4.6% lower from its offer price RM2.60, before it closed at RM2.59 by 5pm today. It was 1 sen lower from institutional price, but 7 sen higher than retail offer price of RM2.52.
|UOA first day trading price|
The open price and trading price went against many of the target price or fair value given by broker firms ranging from RM3.00 to RM3.50.
Do not forget that UOA Development had once slashed its initial retail price RM2.90 by RM0.38 or 13%, to its final retail price RM2.52. The final retail price was fixed based on 97% of institutional price RM2.60. It could mean that UOA did not get its intended offer price range in its Book Building exercise. The huge slash in price could sent a bad signal, but it also presents a more upside.
What does Book Building mean?
The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. Investopedia explains Book Building as an underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay.
In its first quarter 2011 results for just 3 months ended 31 March 2011, UOA reported a profit after tax of RM130 million, compared against its 2010 full year’s profit after tax of RM278 million. It is on track in delivering a growing and improved results in 2011.
It is believed that UOA Development is one of the aggressive developer in the nation by undertaking a series of land acquisitions in building up its land bank. At market capitalisation of RM3.1 billion, UOA is one of the top 5 property developer in Bursa Malaysia. It is believed that UOA share price will rebound.