KUALA LUMPUR: Many of this year’s initial public offering (IPO) stocks have been among Bursa Malaysia’s worst performers — but are they now worth another look?
Interest certainly appears to be returning to them, as investors are starting to take notice of stocks that have fallen under the radar and are offering good bargains.
In the past 1½ weeks, stocks such as UOA Development Bhd, MSM Malaysia Holdings Bhd and Petronas Chemicals Group Bhd have regularly dominated either the top actives or gainers lists, while others like Oldtown Bhd and Benalec Holdings Bhd have bounced well off their lows on high volume.
Many of the newly listed stocks slumped after their debuts. Fuelled by weak market sentiment, they have fallen more than the general market due to a high number of short-term investors, such as venture capitalists, high net worth placees and short-term institutional funds, exiting these stocks, said industry observers.
The renewed interest in IPOs was triggered on Oct 13, when UOA emerged from almost nowhere as one of the most actively traded stocks, closing 22 sen or 17.2% higher at RM1.50.
The stock again emerged as one of the most actively traded a week later last Thursday when it surged 19 sen or 12.58% to RM1.70.
Though ending last Friday lower at RM1.59, the stock has gained 37.1% since hitting a low of RM1.16 on Sept 27. Its net assets per share was RM1.35 as at June 30.
Even now, the stock is still 38.8% off its IPO price of RM2.60 when it was listed on June 8. During its lows, few had noticed that UOA had actually slumped more than 55.4%.
The Edge Financial Daily took a look at some of the best and worst performing IPOs this year, and which stocks may be of interest to investors.
As at last Friday, only eight out of 26 companies listed this year were winners.
The two biggest losers were MClean Technologies Bhd (-68.3%) and XOX Bhd (-69.4%), for fairly obvious reasons as their results have been less than impressive.
They were followed by UOA (-38.8%), Maxwell International Holdings Bhd (-34.3%), Oldtown (-12.8%), and Hibiscus Petroleum Bhd (-10%).
Listed on the ACE Market on May 10, MClean’s share price has dropped 68.3% to 16.5 sen from its listing price of 52 sen.
MClean, which provides precision cleaning services for hard disk drives, caused shock waves when it announced a net loss of RM190,000 just three weeks after its listing in May.
Another ACE Market-listed company, XOX tumbled 69.4% to close at 24.5 sen last Friday, compared with its offer price of 80 sen.
XOX also stunned when it reported a loss of RM1.66 million for 1QFY11 just a day before its debut. The loss sent its share price south by more than 35% on its debut. For its 2QFY11, XOX reported a net loss of RM2.92 million, due to higher selling and distribution expenses.
Value among major losers?
Not all of the IPOs that fared badly were due to their fundamentals, with UOA, Maxwell and Oldtown among those that could look attractive.
Affin Investment Bank has a “buy” call on UOA with a target price of RM2.07.
“We believe that value has emerged after UOA’s sharp share price correction,” it stated in an Oct 12 report.
UOA recently strengthened its landbank with the proposed acquisition of 9.8 acres of freehold land in Kepong for RM72.9 million or RM170 psf.
The report said it expects UOA’s other standalone residential projects such as Setapak Green and Sri Petaling and current unbilled sales of RM684 million to help sustain its medium-term earnings and dividend yield of over 5.5%.
China-based sports footwear designer and manufacturer Maxwell saw its share price close at 35.5 sen on Friday, down 34.3% from its IPO price of 54 sen in January.
While investors have been cautious of China-based companies in general, Maxwell appears to have a good earnings track record and high dividends to boot.
Between 2006 and 2010, Maxwell’s revenue and net profit saw a compound annual growth rate of 46% and 53% respectively.
For its first half this year, it had a cumulative revenue of RM157.34 million and net profit of RM26.99 million. With half-year earnings per share (EPS) of 6.75 sen, its annualised price-earnings ratio (PER) would be just 2.63 times.
Maxwell paid its maiden dividend of 3.35 sen net per share on Sept 28, representing a 9.4% net yield on its prevailing price.
Hibiscus, a special purpose acquisition company, was the first of its kind to be listed on Bursa Malaysia in July. It elicited some negative publicity then for its relatively high premium for what was essentially seen as a cash-rich shell company with management expertise.
From an IPO price of 75 sen though, Hibiscus’ share price has tumbled by 10% to 67.5 sen, above its cash per share of 58.6 sen. Hibiscus has three years from the time of listing to acquire a target company or asset, failing which it will be liquidated.
Meanwhile, despite the resilience of the food and beverage (F&B) sector, Oldtown saw its share price dip by 12.8% to RM1.09 from its IPO price of RM1.25.
Listed in July, the local coffee manufacturer and cafe operator is penetrating the China consumer market by opening its first two cafes in Guangzhou this month. Oldtown has set up a food processing centre in China and is targeting to open more outlets, especially in southern China, to achieve greater economies of scale. Although not rated, a report by OSK Research on Sept 20 valued Oldtown at 12.5 times FY11 EPS, which translates into a fair value of RM1.34.
Top performers: Are they still worth buying?
Some of the IPO stocks which had the best returns as at last Friday are Boilermech Holdings Bhd (+93.9%), Berjaya Food Bhd (BFood) (+71.6%), MSM Malaysia Bhd (+42.9%), Bumi Armada Bhd (+20.8%), and Benalec Holdings Bhd (16%).
Listed on the ACE Market on May 5, Boilermech has been the best performing IPO this year gaining 93.9% to 64 sen from its listing price of 33 sen. Still, the stock has fallen 35.7% from an all-time high of 99.5 sen in May.
A biomass boiler manufacturer, Boilermech is a 35% associate company of food and agriculture group QL Resources Bhd. It is primarily engaged in the manufacture of boilers for the plantation, manufacturing and food industries.
Boilermech’s performance, market observers said, was attributed to its strong parent, QL Resources and its exposure to the renewable energy sector.
The second best performer was BFood, which is mainly involved in the operations of Kenny Rogers Roasters (KRR) restaurants in Malaysia. The stock has climbed 71.6% to 87.5 sen last Friday from its IPO price of 51 sen.
With 68 restaurants, BFood plans to open another 15 KRR restaurants in FY12. Via a joint venture, it will also expand its KRR operations in Indonesia where it targets to open 12 stores by end-June 2012.
For its FY11 ended April 30, its net profit was up by 17% to RM10.2 million from RM8.68 million in FY10. Revenue grew by 19% to RM71.9 million from RM60.42 in FY10.
BFood has a clean balance sheet with net cash of about RM31.29 million and no borrowings as at end-July. It paid its first interim dividend of three sen in FY11, amounting to RM4.26 million, which translates into a payout ratio of 41.8% and net yield of 3.4%. BFood’s earnings for FY13 onwards will get a boost from the ongoing acquisition of a 50% stake in Berjaya Starbucks Coffee Co Sdn Bhd, which will be concluded in 1Q12. It targets to open 12 to 15 Starbucks outlets every year.
Last Friday, the stock had a historical PER of 12.4 times and market capitalisation of RM124.24 million. As a comparison, KFC Holdings (M) Bhd has a historical PER of 17.2 times and market capitalisation of RM2.697 billion.
MSM, the largest sugar refiner in the country, was listed at end-June with an IPO price of RM3.50. Its share price had gained 42.9% to RM5 last Friday, partly due to its small free float.
MSM has adopted a dividend policy to pay out at least 50% of its annual net profit. Assuming this payout level, annual dividends are estimated to be 20 sen per share in 2011/12, which translates into a net yield of about 4% at its closing price on Friday.
As at end-June, MSM had net cash of RM141.7 million, which will support future capital expansion. About RM320 million of the RM425 million proceeds from the IPO have been allocated for capital expansion over the next two to three years.
A report by OSK Research on Sept 27 had a “buy” call on MSM with a fair value of RM5.24.
Benalec worth watching
Analysts say Benalec is a stock worth watching, as the company is well-liked for its niche in land reclamation jobs where margins are high and competitors are few. Its land reclamation projects also provide Benalec with ample and low-cost landbank for property development.
Listed on Jan 17, the stock closed at RM1.16 last Friday, 16% above its offer price of RM1, but well below its year high of RM1.61.
Benalec is bidding for land reclamation projects with a combined estimated contract value of RM8 billion and has a large unbilled order book of RM590 million.
AmResearch and Kenanga Research have “buy” recommendations with a price target of RM2.22 and RM1.93 respectively.
Bumi Armada, an oilfield services provider, rose 20.8% to RM3.66 last Friday, compared with its listing price of RM3.03 in July.
In late September, Bumi Armada announced its wholly-owned unit Armada Balnaves Pte Ltd had signed a floating, production, storage and offloading contract with Apache Energy Ltd, Australia. Valued at about RM1.46 billion, the contract is expected to contribute positively to Bumi Armada’s revenue and earnings for FY11 ending Dec 31.
This article appeared in The Edge Financial Daily, October 24, 2011.
Interest certainly appears to be returning to them, as investors are starting to take notice of stocks that have fallen under the radar and are offering good bargains.
In the past 1½ weeks, stocks such as UOA Development Bhd, MSM Malaysia Holdings Bhd and Petronas Chemicals Group Bhd have regularly dominated either the top actives or gainers lists, while others like Oldtown Bhd and Benalec Holdings Bhd have bounced well off their lows on high volume.
Many of the newly listed stocks slumped after their debuts. Fuelled by weak market sentiment, they have fallen more than the general market due to a high number of short-term investors, such as venture capitalists, high net worth placees and short-term institutional funds, exiting these stocks, said industry observers.
The renewed interest in IPOs was triggered on Oct 13, when UOA emerged from almost nowhere as one of the most actively traded stocks, closing 22 sen or 17.2% higher at RM1.50.
The stock again emerged as one of the most actively traded a week later last Thursday when it surged 19 sen or 12.58% to RM1.70.
Though ending last Friday lower at RM1.59, the stock has gained 37.1% since hitting a low of RM1.16 on Sept 27. Its net assets per share was RM1.35 as at June 30.
Even now, the stock is still 38.8% off its IPO price of RM2.60 when it was listed on June 8. During its lows, few had noticed that UOA had actually slumped more than 55.4%.
The Edge Financial Daily took a look at some of the best and worst performing IPOs this year, and which stocks may be of interest to investors.
As at last Friday, only eight out of 26 companies listed this year were winners.
The two biggest losers were MClean Technologies Bhd (-68.3%) and XOX Bhd (-69.4%), for fairly obvious reasons as their results have been less than impressive.
They were followed by UOA (-38.8%), Maxwell International Holdings Bhd (-34.3%), Oldtown (-12.8%), and Hibiscus Petroleum Bhd (-10%).
Listed on the ACE Market on May 10, MClean’s share price has dropped 68.3% to 16.5 sen from its listing price of 52 sen.
MClean, which provides precision cleaning services for hard disk drives, caused shock waves when it announced a net loss of RM190,000 just three weeks after its listing in May.
Another ACE Market-listed company, XOX tumbled 69.4% to close at 24.5 sen last Friday, compared with its offer price of 80 sen.
XOX also stunned when it reported a loss of RM1.66 million for 1QFY11 just a day before its debut. The loss sent its share price south by more than 35% on its debut. For its 2QFY11, XOX reported a net loss of RM2.92 million, due to higher selling and distribution expenses.
Value among major losers?
Not all of the IPOs that fared badly were due to their fundamentals, with UOA, Maxwell and Oldtown among those that could look attractive.
Affin Investment Bank has a “buy” call on UOA with a target price of RM2.07.
“We believe that value has emerged after UOA’s sharp share price correction,” it stated in an Oct 12 report.
UOA recently strengthened its landbank with the proposed acquisition of 9.8 acres of freehold land in Kepong for RM72.9 million or RM170 psf.
The report said it expects UOA’s other standalone residential projects such as Setapak Green and Sri Petaling and current unbilled sales of RM684 million to help sustain its medium-term earnings and dividend yield of over 5.5%.
China-based sports footwear designer and manufacturer Maxwell saw its share price close at 35.5 sen on Friday, down 34.3% from its IPO price of 54 sen in January.
While investors have been cautious of China-based companies in general, Maxwell appears to have a good earnings track record and high dividends to boot.
Between 2006 and 2010, Maxwell’s revenue and net profit saw a compound annual growth rate of 46% and 53% respectively.
For its first half this year, it had a cumulative revenue of RM157.34 million and net profit of RM26.99 million. With half-year earnings per share (EPS) of 6.75 sen, its annualised price-earnings ratio (PER) would be just 2.63 times.
Maxwell paid its maiden dividend of 3.35 sen net per share on Sept 28, representing a 9.4% net yield on its prevailing price.
Hibiscus, a special purpose acquisition company, was the first of its kind to be listed on Bursa Malaysia in July. It elicited some negative publicity then for its relatively high premium for what was essentially seen as a cash-rich shell company with management expertise.
From an IPO price of 75 sen though, Hibiscus’ share price has tumbled by 10% to 67.5 sen, above its cash per share of 58.6 sen. Hibiscus has three years from the time of listing to acquire a target company or asset, failing which it will be liquidated.
Meanwhile, despite the resilience of the food and beverage (F&B) sector, Oldtown saw its share price dip by 12.8% to RM1.09 from its IPO price of RM1.25.
Listed in July, the local coffee manufacturer and cafe operator is penetrating the China consumer market by opening its first two cafes in Guangzhou this month. Oldtown has set up a food processing centre in China and is targeting to open more outlets, especially in southern China, to achieve greater economies of scale. Although not rated, a report by OSK Research on Sept 20 valued Oldtown at 12.5 times FY11 EPS, which translates into a fair value of RM1.34.
Top performers: Are they still worth buying?
Some of the IPO stocks which had the best returns as at last Friday are Boilermech Holdings Bhd (+93.9%), Berjaya Food Bhd (BFood) (+71.6%), MSM Malaysia Bhd (+42.9%), Bumi Armada Bhd (+20.8%), and Benalec Holdings Bhd (16%).
Listed on the ACE Market on May 5, Boilermech has been the best performing IPO this year gaining 93.9% to 64 sen from its listing price of 33 sen. Still, the stock has fallen 35.7% from an all-time high of 99.5 sen in May.
A biomass boiler manufacturer, Boilermech is a 35% associate company of food and agriculture group QL Resources Bhd. It is primarily engaged in the manufacture of boilers for the plantation, manufacturing and food industries.
Boilermech’s performance, market observers said, was attributed to its strong parent, QL Resources and its exposure to the renewable energy sector.
The second best performer was BFood, which is mainly involved in the operations of Kenny Rogers Roasters (KRR) restaurants in Malaysia. The stock has climbed 71.6% to 87.5 sen last Friday from its IPO price of 51 sen.
With 68 restaurants, BFood plans to open another 15 KRR restaurants in FY12. Via a joint venture, it will also expand its KRR operations in Indonesia where it targets to open 12 stores by end-June 2012.
For its FY11 ended April 30, its net profit was up by 17% to RM10.2 million from RM8.68 million in FY10. Revenue grew by 19% to RM71.9 million from RM60.42 in FY10.
BFood has a clean balance sheet with net cash of about RM31.29 million and no borrowings as at end-July. It paid its first interim dividend of three sen in FY11, amounting to RM4.26 million, which translates into a payout ratio of 41.8% and net yield of 3.4%. BFood’s earnings for FY13 onwards will get a boost from the ongoing acquisition of a 50% stake in Berjaya Starbucks Coffee Co Sdn Bhd, which will be concluded in 1Q12. It targets to open 12 to 15 Starbucks outlets every year.
Last Friday, the stock had a historical PER of 12.4 times and market capitalisation of RM124.24 million. As a comparison, KFC Holdings (M) Bhd has a historical PER of 17.2 times and market capitalisation of RM2.697 billion.
MSM, the largest sugar refiner in the country, was listed at end-June with an IPO price of RM3.50. Its share price had gained 42.9% to RM5 last Friday, partly due to its small free float.
MSM has adopted a dividend policy to pay out at least 50% of its annual net profit. Assuming this payout level, annual dividends are estimated to be 20 sen per share in 2011/12, which translates into a net yield of about 4% at its closing price on Friday.
As at end-June, MSM had net cash of RM141.7 million, which will support future capital expansion. About RM320 million of the RM425 million proceeds from the IPO have been allocated for capital expansion over the next two to three years.
A report by OSK Research on Sept 27 had a “buy” call on MSM with a fair value of RM5.24.
Benalec worth watching
Analysts say Benalec is a stock worth watching, as the company is well-liked for its niche in land reclamation jobs where margins are high and competitors are few. Its land reclamation projects also provide Benalec with ample and low-cost landbank for property development.
Listed on Jan 17, the stock closed at RM1.16 last Friday, 16% above its offer price of RM1, but well below its year high of RM1.61.
Benalec is bidding for land reclamation projects with a combined estimated contract value of RM8 billion and has a large unbilled order book of RM590 million.
AmResearch and Kenanga Research have “buy” recommendations with a price target of RM2.22 and RM1.93 respectively.
Bumi Armada, an oilfield services provider, rose 20.8% to RM3.66 last Friday, compared with its listing price of RM3.03 in July.
In late September, Bumi Armada announced its wholly-owned unit Armada Balnaves Pte Ltd had signed a floating, production, storage and offloading contract with Apache Energy Ltd, Australia. Valued at about RM1.46 billion, the contract is expected to contribute positively to Bumi Armada’s revenue and earnings for FY11 ending Dec 31.
This article appeared in The Edge Financial Daily, October 24, 2011.
