Oil and gas services provider Bumi Armada Bhd. surged 37 percent on its trading debut, as investors scrambled to buy into the country’s growing oil and gas sector.
At a time when many large Asian IPOs have been either downsized, delayed or called off, Bumi Armada’s strong showing highlights robust demand for resources companies in Malaysia. To encourage more demand into Malaysia’s growing oil sector, the government last year announced it would give tax breaks to encourage the development of potential oil reserves in less-profitable fields, part of prime minister Najib Razak’s plan to attract $444 billion in investments by 2020 to boost economic growth.
Analysts say Bumi Armada offers a foothold in both the local and regional oil and gas industry. On the local front, they say the company stands to benefit from national oil company Petroliam Nasional Bhd.’s plan to spend 300 billion ringgit over the next five years to replace and refurbish production assets in Malaysia.
“This is one of the local upstream oil and gas companies that has a global reach. If you are looking to have exposure to Malaysia’s oil and gas sector, this [Bumi Armada] is a must-have in your portfolio,” said Andy Ong, an analyst with Affin Investment.
He said the company deserves a premium valuation to its global peers such as Technip SA and McDermott International Inc., as it offers competitive services and because many other regional companies won’t have access to local projects being done by Petronas.
Bumi Armada, which raised 2.66 billion ringgit ($890 million) from the country’s largest initial public offering so far this year, closed at 4.14 ringgit on the Malaysian stock exchange, compared with an IPO price of 3.03 ringgit, on heavy trading volume of 303.7 million shares. The broader market edged up just 0.2 percent.
“Our IPO received tremendous response and strong demand from both international and Malaysian investors,” Chief Executive Hassan Assad Basma said in a statement.
The company sold up to 878.5 million shares, 79.9 million of them to retail investors. Cornerstone investors for its institutional offering included Great Eastern Life Assurance (Malaysia) Bhd., Permodalan Nasional Bhd., HwangDBS Investment Management Bhd., Prudential Fund Management Bhd., Hong Leong Assurance Bhd., Guoline Capital Ltd and Asia Fountain Investment Co. Ltd
The institutional offering was oversubscribed by about 50 times, the company said.
CIMB Group Holdings, CLSA Asia-Pacific Markets, Credit Suisse Group, Malayan Banking Bhd., RHB Capital and UBS AG advised on the deal. -By Ankur Relia