This article first appeared in The Edge Financial Daily on May 23, 2019 - May 29, 2019

KUALA LUMPUR: Integrated poultry player Leong Hup International Bhd, which made its comeback on the Main Market of Bursa Malaysia last week, has announced a series of stabilising actions by its stabilising manager Maybank Investment Bank Bhd (Maybank IB).

The group finished its debut day last Thursday flat at its initial public offering (IPO) price of RM1.10 a share as overall market sentiment remained cautious amid escalating US-China trade tensions. Since then, the stock has been sliding despite Maybank IB’s stabilising efforts. It fell to RM1.07 last Friday and then slipped another two sen or 1.87% to close at RM1.05 on Tuesday.

A stabilising action is the purchase of stock by underwriters to stabilise or support the market price of a security, immediately following an IPO when the price of the newly issued shares is shaky. The first stabilising action was taken last Thursday, when Maybank IB bought five million shares at RM1.10 per share, followed by another acquisition of four million shares at RM1.0721 per share last Friday. On Tuesday, Maybank IB bought another 10.42 million shares at RM1.0395 a share.

The biggest IPO on the local bourse in almost two years, Leong Hup’s return to Bursa Malaysia was one of the most watched market events this year. Prior to its listing, PublicInvest Research derived a fair value (FV) of RM1.26 for Leong Hup based on 20 times price-earnings multiple to its forecast financial year 2020 core earnings per share of 6.3 sen, while Inter-Pacific Research Sdn Bhd put its FV at RM1.27.

The IPO was met with what Leong Hup termed an “overwhelming” response. The public portion of Leong Hup’s IPO, involving 73 million shares, was oversubscribed by 3.64 times. The 839.5 million IPO shares offered to foreign and local institutional and selected investors were also heavily subscribed.

Several big re-entries into the local bourse in recent years also warranted stabilising actions, among which were Malakoff Corp Bhd — which raised RM1.8 billion during its relisting in 2015 — and Sunway Construction Group Bhd. The latter was also relisted in 2015 and raised RM550 million.

Lotte Chemical Titan Holding Bhd was also subject to stabilising efforts when it was listed in July 2017.