UMW Oil Surges After $744 Million Share Sale: Kuala Lumpur Mover

UMW Oil & Gas Corp. rallied as much as 13.6 percent on its trading debut in Kuala Lumpur after completing a 2.36 billion ringgit ($744 million) initial public offering, the biggest in Malaysia this year.

The oil and gas services provider climbed as high as 3.18 ringgit from an offer price of 2.80 ringgit, before paring gains to close at 3.10 ringgit. It was the most-active stock, with 221.4 million units traded, according to data compiled by Bloomberg. The FTSE Bursa Malaysia KLCI index rose 0.2 percent.

UMW Oil & 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 Asmat Kamaludin said in June. At the 2.80 ringgit IPO price, the stock was valued at 29 times its fiscal 2013 earnings, according to HwangDBS Malaysia Bhd.’s report on Oct. 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 $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 don’t mind paying a high price-earnings multiple.” Ang said he subscribed to the IPO.

New Rigs

UMW Oil, which manufactures pipes and provides offshore drilling services, will take delivery of a fourth rig next May and plans to buy at least one annually till 2018, President Rohaizad Darus said in an interview in Kuala Lumpur today. Each rig can boost revenue by at least $57 million a year, he said. The company can finance the purchase of as many as five rigs without tapping shareholders for more funds, Rohaizad said.

The firm is budgeting as much as $1 billion over the next five years for capital expenditure, he said.

Revenue is projected to rise to 977.9 million ringgit in 2014 from an estimated 734 million ringgit this year, according to the average forecast of nine analysts surveyed by Bloomberg.

UMW Oil 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 Oct. 11.

While UMW Oil will focus on providing drilling services, it won’t rule out venturing upstream into exploration in the future, he said.

“I’ll be comfortable with earnings growth of 25 percent to 30 percent a year,” Rohaizad said. “If the market is bullish, then the growth rate could be higher.”

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