July 11, 2017 / 6:07 AM / 10 days ago

Lotte Chemical Titan in weak Malaysian debut after IPO scaled back

KUALA LUMPUR (Reuters) - Shares of Lotte Chemical Titan Holding Bhd (LOTT.KL) fell in their Malaysian stock market debut, a further indication of weak investor demand after the size of its offering was slashed by a fifth last week.

While the $879 million flotation by the integrated petrochemical producer was still the largest in Malaysia in five years, its lackluster debut may cast a shadow on the other listings lined up for the year.

Lotte Chemical Titan, part of the South Korean conglomerate Lotte Group, fell 1.8 percent to end at 6.38 ringgit on its first day of trade, giving it a market value of 14.7 billion ringgit ($3.4 billion).

The company last week had to cut the size of its offering after its books were undersubscribed and its shares later priced at the bottom of their indicative price range of 6.50-8.00 ringgit per share.

"The lackluster performance of the stock is from the revision of the final retail price ... creating a negative perception that the stock's growth was fully priced in previously," said Mabel Tan, a Public Investment Bank analyst.

Tan said Lotte Chemical Titan's valuation was now attractive as it was cheaper than its peers. It is trading at around 10 times its forward price-to-earnings ratio, compared to its regional peers' average of 12.2, she added.

"The proceeds raised from our IPO will be used to drive our expansion plan in the ASEAN region to further improve operations and capacity," said Lotte Chemical Titan CEO Lee Dong Woo said.

The funds would be used to construct a polypropylene plant in the southern Malaysian state of Johor, develop an integrated petrochemical facility in Indonesia and upgrade the company's existing naphtha cracker, he added.

In contrast to Lotte Chemical Titan's weak debut, rival Petronas Chemicals (PCGB.KL), with a market value of about 55 billion ringgit, rose 1.5 percent on Tuesday.

Poor market conditions, weak oil prices and a volatile ringgit have been a deterrent for IPOs in recent years, but the Malaysian market has seen a revival of sorts with several offerings planned for the year.

Other IPOs reportedly in the pipeline for this year include fast food operator QSR Brands, which is looking to raise about $500 million, and Edra Energy [IPO-EDRA.KL] which is targeting $500 million to $1 billion.

Lotte Chemical Titan had originally planned the IPO for last year but postponed it after South Korean authorities began investigating Lotte Group for alleged wrongdoing.

Reporting by Liz Lee and A. Ananthalakshmi; Editing by Himani Sarkar and Edwina Gibbs

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