Misery Needs Company

When everybody likes something and it turns out bad, we can only shake our heads. Was it due to the 100 points lost by the market when they announced open subscription for the IPO, and was it due to it opening to trade at the year's lowest point for the KLCI? Was the outlook for steel very bad, what changed over just 3-4 weeks? Perwaja got us all hot before and now perplexed. Perwaja's IPO was priced at RM2.90, today was the first day of listing: High 2.80, Low 2.34, current 2.52.

Perwaja was the year's biggest IPO with a market cap of RM1.5bn. The public issue was oversubscribed by 31%. Shares for the restricted offer was oversubscribed by just 24.5% while the public portion of just 11.2m shares was oversubscribed by 189%. As a reader correctly pointed out, the rights to buy Perwaja for Kinsteel shareholders traded suspiciously weakishly. Still, you can only call it as the fundamentals presented itself. Who is to say the rights valuation is correct? Of course now you can say the rights were traded correctly, but no one can base their research valuation on just how the rights were trading - that has too much to do with sentiment. It is a guide.

My wonderful prediction and call on Perwaja: "Perwaja is very likely to hit at least RM4.00 when it comes on, with RM4.20 being the top side. Hence if you have been successful in getting the IPO, good on you. If you are thinking of buying Perwaja in the secondary market, well only if you can get it below RM3.80"

Let's look at fellow research units on what they said on Perwaja:

SJ Securities - Overweight, Fair Value RM3.83, Upstream Steel Play

AmResearch - Fair Value RM4.12, Pure Upstream Play

Aseambankers - Fair Value RM4.50, Subscribe, Forging A New Chapter

Alliance Research - Fair Value RM4.00, Steel Industry New 'Poster Boy'

MIMB - Fair Value RM3.70, Steely Outlook

TA - Fair Value RM4.20, Prove Its Mettle

HLG - Price Target RM4.00, Early Stage DRI Cycle

OSK - Fair Value RM4.90, A Pure Upstream Play

CIMB Research probably breathed a huge sigh of relief as they did not have to write a research report on Perwaja on conflict of interest grounds - lucky bastards.

Well, when you are wrong, you are wrong. Yes, time to mock and make fun of analysts. Part and parcel of the job. Side note, its a great pick up on Perwaja on today's prices... full stop.

p/s photos: Pace Wu Pei Ci