Retail investors' lukewarm on Lotte Chemical IPO

Lotte Chemical Titan Holding Berhad (LCT) faces questions as their retail portion of the initial public offering (IPO) saw only 61.87 per cent being taken up.

The LCT IPO will be the biggest listing in Bursa Malaysia for the past five years, and with the lukewarm reception on the subscription rate from retail investors, the IPO faces questions as to how the retail market is perceiving the IPO on not just the pricing of it, but also its timing.

It is not clear on how LCT will come back on these recent adjustments to their IPO.

The market will fully expect them to address these concerns and perhaps, respond to the lingering questions that they are currently facing.

However, as the IPO plans to raise close to RM4 billion, this is still the biggest IPO on Bursa since 2012, beating Eco World International’s IPO of RM2.58 billion that was done in April this year.

Applications for LCT’s retail portion of 34.51 million shares were received from retail investors of which 55.78 million shares had been set aside.

To contrast the reception of the retail investors, institutional investors fully subscribed their portion.

Institutional investors fully took up the 524.22 million shares offered to them. However, it is important to note that the institutional offering was slashed by 23.44 per cent from the original amount of 684.7 million shares.

Bursa Malaysia has a public shareholding spread requirement of 25 per cent. With the move on cutting down LCT’s public shareholding spread, LCT barely made the mark of meeting the requirement with a 25.13 per cent spread, down from the anticipated 30 per cent calculated prior to the slashing.

There was also a key announcement made by LCT to Bursa on lowering the IPO share price. New IPO price is now RM6.50 per share, down from RM8.00 per share initially stated. The company said a refund of the difference of RM1.50 per share will be made to successful retail applicants.

Earlier, various research houses placed LCT’s shares to be valued above the RM6.50 mark. Kenanga Research valued LCT at RM9.05 per share.

Hong Leong Research said it is more at the RM7.39-mark.

The proceeds following the IPO is meant to fund partially, LCT’s integrated petrochem facility in Indonesia. Other uses of the proceeds is to fund their Johor’s polypropylene plant and other projects.

With the adjustments of pricing in place, the IPO is targeted to raise about RM4. LCT is expected to achieve a post-listing market capitalization of about RM15 billion.