Showing posts with label klci ipo. Show all posts
Showing posts with label klci ipo. Show all posts

Tuesday 12 April 2011

Almost as many companies taken private as IPOs the past 6 months

Tuesday April 12, 2011

Almost as many companies taken private as IPOs the past 6 months
By JEEVA ARULAMPALAM



PETALING JAYA: Although the number of initial public offerings on the local stock exchange doubled to 29 last year from 2009 and the first quarter of this year has seen nine companies list, there was also a sizeable number of companies being taken private.

In comparison, 13 companies have been listed on the Main Market of Bursa Malaysia since last October to April this year while over 10 Main Market companies received privatisation proposals in that same duration.

Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose said a reason for the slew of privatisation was because those stocks were trading at valuation discounts in comparison to regional peers.

He added that aside from companies being undervalued by the local market, another rational was that “we are on the cusp of a corporate spending cycle”, since the corporate sector has been largely cashed up.

“There are multiple reasons why companies are taken private. For instance, the owners of a company sees value in a company and will rather privatise it so that the profits can be kept for themselves. Also, some owners may want to list the company in other markets such as Hong Kong as they seek out better value,” said TA Securities Holdings Bhd head of research Kaladher Govindan.

He added that as with government initiatives undertaken to attract foreign direct investments into the country, there should be policies or incentives to make it more attractive to keep companies listed here, especially since their operations are based domestically.

A popular route used for such privatisation proposals by its major shareholders, notably in the last six months, was the takeover of assets and liabilities of the listed entities, including Sunway Holdings Bhd and Sunway City Bhd, PLUS Expressways Bhd, Emivest Bhd, Leong Hup Holdings Bhd and Asia Pacific Land Bhd.

For instance, Sunway Group chairman Tan Sri Jeffrey Cheah and his daughter proposed to take over the assets and liabilities of Sunway Holdings Bhd and Sunway City Bhd (listed on the Main Market) late last year through their own vehicle Sunway Sdn Bhd. After the privatisation of both these companies, the plan is to list Sunway Sdn Bhd sometime this year.

Other companies to have more recently received privatisation proposals include Berjaya Retail Bhd and Mamee-Double Decker (M) Bhd.

While the number of listings may be comparable to the quantum of companies being taken private, it must be noted that there were two significant listings Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and Petronas Chemicals Group Bhd by market capitalisation in the final quarter of last year. Both companies are Petronas-owned.

As at yesterday, MMHE and Petronas Chemicals had a market capitalisation of RM10.99bil and RM53.32bil respectively, while the latter is a member of the FTSE Bursa Malaysia KL Composite Index.

However, industry players note that companies being taken private equal less stock options for investors in the market and will not bode well for overall market sentiment.

Over the last nine years, the total market capitalisation of Bursa Malaysia had grown at a rate of 10% per annum, while stock markets in Indonesia and Singapore had grown at 24% and 17% respectively.

Malaysia's MSCI Asia excluding Japan weighting has shrunk to only 3.2% from 6% in 2000, causing international fund managers to disregard Bursa.

To add to this, Bursa's liquidity has lost its vibrancy, with its liquidity ranking in Asia dropping from third in 1996 to 14th this year. There is also limited diversity in the market, be it in terms of products or currency.

Invest Malaysia 2011, which starts today over a two day period, is expected to see the unveiling of several highly anticipated IPOs which include the listing of several units under Felda Global Ventures Holdings Sdn Bhd.

Saturday 25 December 2010

How can I make money from Initial Public Offerings (IPOs)?


Why does a company go public?
A public company will be more closely watched by securities regulators. It also has to meet tougher reporting rules. So why would a company go public? Reasons include:
  • RAISE CAPITAL

    - A public company sells shares to raise money to improve its business.
  • GET FINANCING

    - Public companies may be able to borrow more easily and on better terms.
  • ATTRACT GOOD PEOPLE

    - Public companies are more likely to offer stock purchase plans or stock options to keep their top employees or attract new ones.
  • CREATE A STRONGER BRAND

    - A public company often gets more media attention so people get to know its brand better.
What should I ask before I buy an IPO?
  • WHAT WILL I MAKE?

    Most of the time, IPOs are more risky than a stock that’s been on the stock market for a while. It’s very hard to predict how the price of an IPO will change once it goes on sale. Before you decide, read the prospectus from the company issuing the IPO. The prospectus describes the business plan and notes important risk factors. Check whether the company is making money or when it expects to become profitable.

  • WHAT FEES WILL I PAY?

    In most cases, you won’t pay any commission to buy an IPO. That’s because the company issuing the IPO hires underwriters to price and market the new stock. Underwriters get large fees for their services. Their earnings and fees are built into the price of the stock. You can’t avoid these built-in fees. However, you can make sure the costs are in line with what you hope to make.
Remember: Find out as much as you can before you buy an IPO
Make sure you know how much growth you can reasonably expect from the stock and how long you want to hold it.

Saturday 1 May 2010

Buffett (2000): IPOs usually result in transfer of wealth and that too on a massive scale from the ignorant shareholders to greedy promoters.


In Warren Buffett's letter for the year 2000, he talked about how investors, in their irrational exuberance, tend to gravitate more and more towards speculation rather than investment. Let us go further down the same letter and see what other investment wisdom he has to offer.

IPO – It’s Probably Overpriced

If it is out there in the corporate world, it has to be in the master's annual letters. Over the years, Mr. Buffett has done an excellent job of giving his own unique perspective of the happenings in the business world. Whatever be the flavour of the season, you can rest assured that it will be covered in the master's letters. Since the letter for the year 2000 was preceded by the famous 'dotcom bubble' and the flurry of IPOs associated with it, the master has spent a fair deal of time in trying to give his opinion on the same. And as with other gems from his larder of wisdom, strict adherence here too could do investors a world of good.

On IPOs, the master goes on to say that while he has no issues with the ones that create wealth for shareholders, unfortunately that was not the case with quite a few of them that hit the markets during the dotcom boom. Unlike trading in the stock markets, IPOs usually result in transfer of wealth and that too on a massive scale from the ignorant shareholders to greedy promoters. The master feels so because taking advantage of the good sentiments prevailing in the markets, a lot of owners put their company on the blocks not only at expensive valuations that leave little upside for shareholders but most of these companies end up destroying shareholder wealth.

Hence, while investing in IPOs, two things need to be closely tracked. 
  • One, the issue is not priced at exorbitant valuation and 
  • second, the company under consideration does have a good track record of creating shareholder wealth over a sustained period of time. 
Thus, if an IPO is only trying to sell you promises and nothing else, chances are that you are playing a small role in making the promoter, Mr. Money Bags.

Master's golden words

Let us hear in the master's own words his take on the issue. He says, "We readily acknowledge that there has been a huge amount of true value created in the past decade by new or young businesses, and that there is much more to come. But value is destroyed, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get."

He further adds, "What actually occurs in these cases is wealth transfer, often on a massive scale. By shamelessly merchandising birdless bushes, promoters have in recent years moved billions of dollars from the pockets of the public to their own purses (and to those of their friends and associates). The fact is that a bubble market has allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them. Too often, an IPO, not profits, was the primary goal of a company's promoters. At bottom, the ‘business model’ for these companies has been the old-fashioned chain letter, for which many fee-hungry investment bankers acted as eager postmen."

To conclude, the master says, "But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: 
  • First, many in Wall Street - a community in which quality control is not prized - will sell investors anything they will buy. 
  • Second, speculation is most dangerous when it looks easiest."

Monday 29 March 2010

A quick look at Kelington Group Berhad KGB (ACE)

Kelington Group Berhad Company

Business Description:
Kelington Group Berhad. The Group's principal activities are providing engineering services and general trading. It provides UHP gas and chemical delivery systems solutions that comprise of products and services, such as system design and installation, gas and chemical industry equipment, control and instrumentation, QA and QC, as well as maintenance and servicing to various foundries and clients who require UHP gas or chemical delivery systems in Malaysia, the People's Republic of China, Taiwan and Singapore.

Stock Performance Chart for Kelington Group Berhad

Current Price (3/26/2010): .74
(Figures in Malaysian Ringgits)



Wright Quality Rating: LBNN


The ratings consist of three letters and a number. Each letter reflects a composite qualitative measurement of numerous individual standards which may be summarized as follows:
A = Outstanding; B = Excellent; C = Good; D = Fair; L = Limited; N = Not Rated.










Comment:
This is a recent IPO (November 2009).  
Probably better to avoid IPO in general.
Its longer term profitability and growth have yet to be established.  
Can relook after a few years when its business track record can be better assessed.




A quick look at KGB.
http://spreadsheets.google.com/pub?key=tHqBfx2E03AKh6UHmeay3aw&output=html
Once again, it is not easy to assess a newbie company.

Friday 29 January 2010

Why I usually avoid IPOs

I browsed the local paper for those stocks priced closest to the year low. There were 35 stocks listed: 29 derivatives (warrant) and 6 non-derivatives (mother share). Stemlife was in this list.




This company was listed with much hype in 2006.  Its revenue grew quickly in this virgin medical sector.  Those uninformed customers and investors saw "unlimited" potentials from this new medical technology.  The business model was not one with durable competitiveness.  With new competitors in the market, I can foresee this company's business will be challenging.

Listing in 2006 was the right timing as the stock was chased up to a high level during the bull market then.  At the peak market price of more than MR 6 in 2007,  its market cap was almost MR 900 million.   It was not surprising that a significant large investor (insider) sold when the price was close to its peak; making a huge profit from the shares, locking in many years of future profits that the company can hope to generate through its business.  

At 45 sen per share, its present market cap is MR 74.3 million. What is its intrinsic value?  Interestingly, more major investors sold and exited the company recently.

This is a good company to study as it provides a lot of education on how to select the stocks you wish to invest into.  In general, it is better to avoid IPOs.  IPOs are never priced cheap.  You can always let them build their business for a few years.  Given the track record you can then assess the business fundamentals with more certainties, before you invest.

Some simple rules I follow:

A good company can be a good investment at fair price or bargain price.
A good company may be a bad investment if you overpay.
Avoid a  lousy company at any price.






Insiders selling in huge volumes this January, desperate to unload
.
STEMLIFE BERHAD (ACE Market)
====19/01/2010 Notice of Person Ceasing (29C) - The Goldman Sachs International
====19/01/2010 Notice of Person Ceasing (29C) - The Goldman Sachs Group, Inc.
====19/01/2010 Changes in Sub. S-hldr's Int. (29B) - The Goldman Sachs International
Disposed 12/01/2010 5,706,000
====19/01/2010 Changes in Sub. S-hldr's Int. (29B) - The Goldman Sachs Group, Inc.
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - BERJAYA GROUP BERHAD
Disposed 14/01/2010 4,050,000
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - BERJAYA CORPORATION BERHAD
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - JUARA SEJATI SDN BHD
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - TAN SRI DATO' SERI VINCENT TAN CHEE YIOUN
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - HOTEL RESORT ENTERPRISE SDN BHD
====13/01/2010 Notice of Person Ceasing (29C) - HSC HEALTHCARE SDN BHD
====13/01/2010 Changes in Sub. S-hldr's Int. (29B) - HSC HEALTHCARE SDN BHD
Disposed 11/01/2010 10,000,000


Fundamentals


INCOME STATEMENT                           12/31/2006    2/31/2007  12/31/2008
                       
Net Turnover/Net Sales14,57820,45618,509
EBITDA4,6346,021195
EBIT3,7195,112327
Net Profit3,7725,5151,317
Ordinary Dividend-1,650-1,650-1,650







Recent Financial Results


Announcement
Date
Financial
Yr. End
QtrPeriod EndRevenue
RM '000
Profit/Lost
RM'000
EPSAmended
04-Mar-1031-Dec-09431-Dec-094,971-2,610-1.55-
24-Feb-1031-Dec-09431-Dec-094,971-2,241-1.33-
26-Nov-0931-Dec-09330-Sep-094,3314100.27-
20-Aug-0931-Dec-09230-Jun-093,691650.09-

Friday 8 January 2010

Value of Equity Offerings in Malaysia in 2009

Malaysia equity offerings


Year RM mil (No. of issue) % chg


2009 15,234 (26) 857.51%
2008 1,591 (24) -81.22%
2007 8,472 (48) 130.84%
2006 3,670 (45) -8.14%
2005 3,995 (86) -19.71%
2004 4,976 (72) 62.67%
2003 3,059 (49)


Source: Bloomberg


Malaysia's equity market expanded more than eight times to RM 15.23 billion year-on-year in 2009, helped by Maxis Bhd's mega initial public offering (IPO) as well as the liberalisation of bumiputera equity rules. This came after a 81.2% year-on-year slump in activity to RM 1.59 billion in 2008 from the pre-Lehman collapse heydays of 2007 that saw RM 8.47 billion raised from 48 issuances.


"The sharp increase in equity market activity could be attributed to the easing of listing regulations on Bursa Malaysia. This encourages more foreign companies to list on Bursa Malaysia, which saw three Chinese companies listed in 2009," Bloomberg said in its latest annual review of Malaysia's capital market.


The number of equity offerings was only up marginally to 26 in 2009 from 24 in 2008.


CIMB topped 2009's list of investment banks that sold and underwrote a company's securities in Malaysia.
  • CIMB topped the 2009 Malaysian Ringgit Bonds table, having arranged issuances worth RM 18.63 billion in proceeds.
  • CIMB also topped the 2009 Malaysian Ringgit Islamic Bonds table with RM 12.61 billion in proceeds arranged, cornering 39.2% market share, according to data from Bloomberg's Malaysia Capital Markets Review.


Malaysian corporate bond


Total Malaysian corporate bond issuances:
2009 RM 52.46 billion (+8.25% from last year)
2008 RM 48.63 billion


Malaysian Islamic Bond Issuances (component of Total Malaysian corporate bond issuances)
2009 RM 32.17 billion (+42.5% from last year)


The 42.5% jump in Malaysian Islamic bond issuances last year made up for the 21.42% slide in corporate bond issuances in 2009.



Syndicated Loans Market

The volume of syndicated loans market in Malaysia, meanwhile, slumped.
2009 US$4.55 billion ( -53.44% from last year)
2008 US$9.77 billion



The Edge Financial Daily