Believing The IPO Story

Newly-listed Ranhill Holdings Berhad (“Ranhill”) closed at RM1.01 on its debut day (down from its IPO price of RM1.20 per share). Initial IPO price was set at RM1.70 per share but was subsequently revised down to RM1.20 per share. http://www.dealstreetasia.com/stories/malaysia-ranhill-makes-soft-market-debut-optimistic-of-prospects-34375/

Possible reasons that could explain such poor debut:

Potential Upside?

Are we going through another failed IPO? I beg to differ in this case, as it is backed by stable cashflows & long term power & water concession assets. Hence, we should assess the counter based on its potential dividend yield. Yield is a very important consideration considering there is a prevailing global trend towards negative yield / interest rate. The Star reports : “At its price of RM1.01, Ranhill’s shares are now trading at a projected dividend yield of between 6.5% and 7.7% for financial year 2016 (FY16).”  http://www.thestar.com.my/business/business-news/2016/03/17/ranhill-in-lacklustre-debut/

Public Research has a target fair value of RM1.25 (revised) pegged to this counter. http://www.thesundaily.my/news/1722210

We also saw some support coming from some institutional buyers (e.g LTH) which have been accumulating the counter:

No Announcement Date Company Title
1 28 Mar 2016 RANHILL HOLDINGS BERHAD Changes in Sub. S-hldr’s Int. (29B) – LEMBAGA TABUNG HAJI

2 25 Mar 2016 RANHILL HOLDINGS BERHAD Changes in Sub. S-hldr’s Int. (29B) – LEMBAGA TABUNG HAJI

3 25 Mar 2016 RANHILL HOLDINGS BERHAD Changes in Sub. S-hldr’s Int. (29B) – LEMBAGA TABUNG HAJI

Would the rebound continue?

As of today, Ranhill rebounded from its low of RM1.01 to RM1.10 (current). Personally, the dividend yield range of 5.0% – 5.5% would cap the maximum price range of Ranhill. Assuming a forecast dividend of RM0.065 /share, we are looking at a potential range of RM1.18 – RM1.30

Another important consideration is that there could be potential volatility in the share price of Ranhill once the lockup arrangements with selling shareholders / investors expire 180 days from the listing date (16 March 2016) (http://www.bursamalaysia.com/market/listed-companies/company-announcements/4963809)

DISCLAIMER: THIS SITE IS FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED ABOVE.

Author: Ken Utau

Markets Observer + Food Lover

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s