Lotte Chemical Titan lowers Malaysian IPO expectations

Lotte Chemical Titan Holding, a Malaysian unit of South Korean

conglomerate Lotte Group, on Tuesday set a lower share price for the

upcoming initial public offering (IPO) in Malaysia, fixing the price at

6.50 ringgit (1.51 U.S. dollars).

The new offer price was much lower than its earlier price range of between 7.60 ringgit and 8 ringgit per share.

With Lotte already paring down its IPO size by 21.7 percent on Monday

from 740.48 million shares to 580 million shares, it is expected that

smaller gross proceeds will be raised, down from 5.92 billion ringgit to

3.77 billion ringgit.

The IPO of Lotte Chemical Titan, Malaysia's largest producer of

olefins and polyolefins products, was earlier expected to be the largest

in Malaysia since August 2012 and the largest in Southeast Asia since

May 2013.

In a statement sent to the Malaysian stock exchange, the company

emphasized that "the change in proceeds is not expected to materially

affect the company's ability to fund the development and construction of

the integrated petrochemical facility."

Lim Sin Kiat, an analyst with Hong Leong Investment Bank Research,

said in a report dated June 28 that the IPO should be fairly priced at

7.39 ringgit, due to its smaller size compared to its peer Petronas

Chemical, an integrated chemical producer under Malaysian state-owned

oil and gas firm Petroliam Nasional (Petronas).

"We (also) believe petrochemical product margins for Lotte Chemical

Titan appear to have peaked and the risk of margins reverting to lower

levels is high at this level given the expectation of capacity expansion

in regional and global market," he added.

The IPO, slated for the date of July 11, was the second time for

Lotte to go public in Malaysia, after it was taken private in 2011. (1

Malaysian ringgit = 0.2326 U.S. dollar)