|Felda debuts on Bursa today|
|In The Edge Financial Daily Today 2012|
|Written by Syarina Hyzah Zakaria of theedgemalaysia.com|
|Thursday, 28 June 2012 17:00|
KUALA LUMPUR: All eyes will be on Felda Global Ventures Holdings Bhd’s (FGV) debut on Bursa Malaysia’s Main Market today, with analysts bullish on its future performance amid a grim global macroeconomic outlook.
The most highly anticipated listing of the year in Malaysia, raising some RM10 billion, it will be one of the largest IPOs in the world, second only to Facebook Inc.
FGV is offering some 2.19 billion shares to the public, of which 980 million are new shares. Once listed, it will have a market capitalisation of RM16.6 billion based on its expanded share base of 3.65 billion shares and the retail offer price of RM4.55.
The public portion of the IPO was 6.75 times oversubscribed, while the institutional portion was oversubscribed 45 times. According to Bloomberg, the plantation group has three “buy” calls and one “outperform” call by analysts, with a consensus target price of RM5.53. (See table for price targets by various houses.)
However, the performance of newly-listed entities on the local bourse this year has been less than exceptional, with only a handful outperforming their first-day closing market capitalisation. According to Bursa Malaysia’s IPO performance review, four out of seven companies listed in 2012 had lost between 10% and 20% of their market capitalisation value as at June 27.
Property developer Sentoria Group Bhd lost 20.38%, lift manufacturer and electronics distributor Eita Resources Bhd declined 12.20%, technology concern Pestech International Bhd slipped 10.44% while Globaltech Formation Bhd fell 9.52%.
Bucking the trend were recent additions Gas Malaysia Bhd, oil and gas outfit SapuraKencana Petroleum Bhd and China Stationery Ltd which gained 3.72%, 5.71% and 23.64% respectively.
In addition, there has been concern that FGV’s first trading day may be marred by technical glitches not unlike those experienced by Facebook on its debut on Nasdaq, given the huge number of shares being floated. However, Bursa has assured that its systems are robust enough to handle a significantly higher volume of trades expected with the listing of FGV.
Just this week, FGV’s announcement to Bursa of a 47% drop in its net profit to RM192.16 million for 1QFY12 ended March 31 from RM359.05 million a year ago made news in the foreign press. The decline was attributed to costlier sales and administrative expenses as well as fair value changes in the land lease agreement liability for the quarter.
However, a plantation analyst with ECM-Libra Research told The Edge Financial Daily FGV would not be adversely affected by the disappointing results, as it had already priced weak 1Q earnings into its prospectus.
“It was just a transitional quarter as it had signed contracts with Felda Holdings in March for the supply of crude palm oil; it was a period of turnaround and impairments while merging the two entities,” he said, adding that its full-year earnings should still be in line with forecasts. It would be interesting to see how the IPO performs today after eight years of challenges in listing the entity.
In 2004, then prime minister Tun Dr Mahathir Mohamed announced plans to list the entity during the 2004 budget announcement, but the idea was subsequently dismissed due to strong opposition from the public.
This article appeared in The Edge Financial Daily on June 28, 2012.