UMW Oil and Gas Corp gained as much as 10.7 per cent on its debut trading in Kuala Lumpur after completing a RM2.36 billion initial public offering, the biggest in Malaysia this year.
The oil and has services provider's shares climbed to as high as RM3.10 from an offer price of RM2.80 for individuals and institutions. The stock was the most-active in Kuala Lumpur, with 136 million units changing hands as of 10.52am local time, according to data compiled by Bloomberg. The FTSE Bursa Malaysia KLCI index was 0.2 per cent higher.
UMW Oil and Gas was spun off by car assembler UMW Holdings Bhd to help it raise funds more easily as the energy industry is capital intensive, chairman Tan Sri Asmat Kamaludin said in June. At the RM2.80 IPO price, the stock was valued at 29 times its fiscal 2013 earnings, according to HwangDBS Malaysia Bhd report on October 11. That compares with an industry average of 43.7 times in Malaysia, data compiled by Bloomberg show.
"Investors are buying because they're confident that UMW Oil's future profits will be good," Ang Kok Heng, who helps manage US$428 million in Kuala Lumpur as chief investment officer at Phillip Capital Management Sdn, said in an interview today. "Since sentiment on oil and stocks is strong, people also don't mind paying a high price-earnings multiple."
Ang said he subscribed to shares during the offering.
UMW Oil, which manufactures pipes and provides services including offshore drilling and pipe-coating, priced the IPO at the top of its marketed range after attracting institutional demand of more than 50 times the number of shares offered, two people familiar with the IPO said October 11.
The company, in which UMW Holdings holds a 61 per cent stake, has "explosive" earnings growth potential from its jack-up rig business, HwangDBS wrote in the report, setting a fair value of RM3.20
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