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Nikkei Markets

UPDATE: Lotte Chemical Likely To Cut Malaysia IPO Floor Price, Relaunch Bookbuilding-Sources

By Gho Chee Yuan and Jason Ng
Nikkei Markets
recasts lead, adds more comments on IPO
KUALA LUMPUR (Jun 30) -- Lotte Chemical Titan Holdings, the Malaysian unit of petrochemical giant Lotte Chemical Corp, plans to seek fresh orders from institutional investors for its initial public offering on Monday following valuation concerns, two people familiar with the development said Friday.

The company is also likely to lower the IPO's floor price to 6.50 ringgit from 7.60 ringgit per share previously, the people who didn't wish to be identified told Nikkei Markets. The deal was initially scheduled to be priced on Thursday before being deferred due to valuations concerns, the people said.

"The listing is still on but there is concern among institutional investors about its valuations," one of the people said. "Lotte and their advisors are in talks with the Securities Commission for a relaunch."

The IPO--the Southeast Asian nation's biggest in five years--was marketed at between 7.60 ringgit and 8.00 ringgit a share to institutional investors, according to an earlier term sheet. The orders closed Wednesday.

At the lowest end, Lotte Chemical's IPO could raise 4.81 billion ringgit ($1.12 billion), the highest since Astro Malaysia Holdings raised $1.5 billion in 2012.

Some brokerages such as Hong Leong Investment Bank estimates Lotte Chemical's shares to be fairly valued at 7.39 ringgit apiece, which is at a 7.6% discount to the indicative IPO ceiling price of 8 ringgit per share. Hong Leong said in an investor note that petrochemical product margins for the company appeared to have peaked and the risk of margins reverting to lower levels is currently high given the prospects of capacity expansion in regional and global markets

The deal was expected to be priced at the bottom-end of its marketing range despite being fully-covered at book building, one of the people said.

The company pitched 684.7 million shares to institutional investors, while the retail tranche was allocated 55.78 million shares. Proceeds raised from the IPO will be mainly used to build a naphtha cracker in Indonesia and a polypropylene facility in Malaysia.
- By Gho Chee Yuan and Jason Ng; jason.ng@nikkeinewsrise.com; +603-20267363
- Edited By Abhrajit Gangopadhyay
- Send Feedback to feedback@nikkeinewsrise.com
- Copyright (c) 2017 Nikkei NewsRise Asia Pte Ltd.

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