New IPOs

Lock Up Periods / Moratorium

Lock ups or moratorium are periods within which initial investors, those whom have purchased shares prior listing, are NOT allowed to sell legally. They may sell their shares after the stipulated period (based on individual company lock up/tie up period/moratorium agreement). For example, Twitter shares which was listed in the States had a fall in share price as soon as the lock up period was over recently as initial investor could finally lock in their profits by selling their shares (have since seen a rise in share price).

New companies such as Icon Offshore Bhd and Boustead Plantations Bhd and all others in Malaysia do not have lock up periods. Thus, "cornerstone investors" as they are frequently labelled may sell their positions as soon as these companies are listed.

In wrought conclusion, speculation may peak on listing day for any given IPOs. Thus, a fall in price should not discourage investors. Though having analysed the prospectus adequately might prove beneficial to buy into the drop in prices. The perfect example would have been Titijaya Bhd in the earlier half of 2014.

However, this is a rough analysis of the 2 mentioned new companies. Icon Offshore was previously the offshore related division (OSV) of Tanjung Offshore Bhd, now listed as a separate company specializing in offshore related activities (OSV). It also has EKUINAS as one of their major shareholder. Considering its ties to EKUINAS, it is projected that this company will successfully capitalize new funds garnered from listing to expand its business through government related contracts. And for your information, this company was previously known as Tanjung Kapal Services Sdn. Bhd.

According to a self survey, it is seen that most IPOs since the 4th quarter of 2013 until present 2014 3rd quarter have seen a relatively good increase in share price on average. Namely due to listing requirements by Securities Commission Malaysia and Bursa Malaysia that are conservative in nature relative to the States & the paring down of debts, increase in capex / assets / etc via listing capital, communing better evaluations in research reports produced by banks and other institutions.

Despite the above, it is to be noted the number of times Boustead Plantations have been listed, delisted and re-listed & the acres of new plantation that have matured as compared to total new plantation area. It is opined new funds will be used to make land acquisitions at a relatively diluted value per shareholding due to current total shares issued and held by major corporation/individual.

In terms of investment, acquiring agricultural land personally/collectively with partner(s), if financially viable, and contracting it out to garner returns would seem the better choice, assuming land is bought in areas targeted by the company mentioned. A return in crops of above 15% on contract may give a 10% return if financed by a 4% interest bearing loan. There are many specially available loans provided by banks (i.e. SME Bank) & government related sources currently.

The key is finding a value for money investment. Agricultural land can still be acquired in certain regions for low prices relative to their earning capacity.

Therefore, capitalise wisely and happy investing.

[Please note: These are all opinions and are not intended to be used as advice for investment purposes until and unless proper evaluations are conducted personally according to individual financial means, upon which liability is fully borne by the decision maker]