IPO - ICON Offshore

Coming up fast on my IPO radar is Icon Offshore, an oil and gas support service company which launched its prospectus last Friday 30 May 2014. It is a pure-play OSV (Offshore support vehicle) company with a fleet of ships used for transporting people, goods and equipment to offshore rigs. 

The company was formed in 2012 through the merger of  Tanjung Kapal Services Sdn Bhd and Omni Petromaritime Sdn Bhd. It is the first of the spin-off companies under government-linked private equity, Ekuinas, to list on the main market. It is reported to have the youngest fleet of ships compared to its competitors.

Though its valuation is high at RM1.85 (trading at 17-18 times its estimated earnings in 2014), investors however, are not deterred by it. So far it has managed to rope in cornerstone investors such as Permodalan Nasional, Tabung Haji, AIA Bhd and several major funds. Together they have taken up more than 50% of the offered units. These investors will be subject to a lock up period of six months.

According to its prospectus about 35m shares are made available (compared to 64m shares by BPB) to the public via balloting. Applications are being accepted till 6 June at 5pm and balloting on 10 June, allotment of shares to successful applicants on 23 June and listing on 25 June, a day before Boustead Plantation Berhad (BPB).

I don't know about you all, but I think any stock related to  an oil and gas (O&G) industry has always been investors' darling irrespective of analysts' reports. 

 I missed out on UMW IPO last year as I was not happy that they were raising capital to pay off their mammoth debt. I advised some relatives not to apply as well: it was at an IPO of 2.80 (listed on Nov 1 2013) and look at it now, last closing price on Monday June 2 2014 was 10.80! And this fantastic rise is recorded slightly over six months. 

On the other hand, I thought the port operator; Westports was a better choice as they did not issue new shares to pay off any debt at their listing around the same time as UMW. And look at the performance of the two stocks: Westports hardly moved from its IPO of 2.50 over the six months' period from the date of its listing.

Needless to say, I have not been popular ever since. My relatives have stopped asking for my opinion. Well, it's okay as I won't ever get blamed again :)

By the way, there are risks in this O&G industry as it is a cyclical industry coming in waves of five to seven years and an analyst has opined that local OSV market could currently be at the top end of the cycle but did not see a downtrend any time soon.

Other risks are well spelt out in its prospectus which includes business related factors such as governmental regulations, high gearing, Petronas policies towards the oil and gas industry, stiff competition and its dependency on limited customers.

Unlike Boustead Plantation, it doesn't have any fixed dividend policy.

And so for Icon Offshore IPO, I have chosen to review my decision on the amount of fund to be used in my application for BPB IPO as I am going to also try my luck for this O&G related stock. 

To all of you it's "Caveat Emptor", good luck and happy investing!