Finance Asia’s Best Mid-Cap Equity Deal KrisEnergy’s $239 million IPO

KrisEnergy’s $239 million IPO
Bookrunners: Bank of America Merrill Lynch, CLSA
December 2013

While most of the IPOs in Singapore this year have been yield focused Reits or business trusts, Kris Energy distinguished itself by being a high-risk growth play.

As a pure oil and gas exploration and production company with a focus on Southeast Asia that is yet to become profitable on the bottom line, it faced a lot of hurdles, especially at a time of highly volatile markets that saw a number of other IPOs being pulled or delayed. It was also the first company to list under new Singapore regulations that allow unprofitable companies in the oil and gas and mining sectors go public.

But the management and the joint bookrunners broke the challenges down one by one and managed to achieve one of the most impressive new listings in the past 12 months.

The key was to make investors believe in the management and their ability to deliver on their business plan, which is to identify and acquire exploration rights around the region and develop them into producing assets. The fact that the three founders have done this once before with another company that achieved returns of more than 230% from listing to privatisation, clearly helped and so did the support from Temasek-controlled Keppel Corp, both as a strategic investor and as one of three cornerstones that took up 38% of the base deal.

The rest was achieved through extensive marketing, which among other things convinced investors to value the company based on sum-of-the-parts risk-based net asset value, thus allowing for a significantly higher valuation than would otherwise have been possible. One observer noted that investors were basically asked to pay for 100% of the potential upside upfront. And they did.

The deal ended up heavily oversubscribed and priced at the top of the range for a market capitalisation of about $950 million. On top of that, it has outperformed the broader Singapore market by 10% to 20% since the trading debut in mid-July.