Sat, Dec 06, 2003 - Page 11 News List

Formosa Petrochemical a hit with retail investors


Formosa Petrochemical Corp (台塑石化) received NT$11.1 billion (US$325.4 million) of orders from individual investors, 1.92 times more than the company plans to sell to them in an initial public offering, the Taiwan Stock Exchange said.

The refiner offered individual investors 134.7 million shares at NT$43 million apiece, three-quarters of the offering. The four-day sale ended on Thursday, the exchange said in a statement.

"The plastics and petrochemical industry should grow next year," said Shen Yen, a fund manager at Taipei-based Franklin Templeton First Taiwan Securities Investment Trust Enterprise.

Formosa Petrochemical plans to raise as much as NT$7.72 billion from its sale of 179.5 million existing shares, a quarter of which are set aside for underwriters, led by Capital Securities Corp (群益證券). The shares are equivalent to a 2.3 percent stake.

The NT$43 offer price represents a price-to-earnings ratio of 19 times this year, based on its profit forecast. Nan Ya is trading at a ratio of 23 times, according to Bloomberg data.

Formosa Petrochemical, which has a refining capacity of 450,000 barrels of crude oil a day, competes with state-owned Chinese Petroleum Corp (中油), whose refinery can process 770,000 barrels a day.

Formosa Plastics Corp (台塑), the flagship of Taipei-based Formosa Plastics Group, owns a third of Formosa Petrochemical. Formosa Chemicals & Fibre Corp (台塑化纖) has 28 percent, and Nan Ya Plastics Corp (南亞塑膠) 27 percent. The three are the main units of the nation's biggest industrial group, Formosa Plastics Group.

Shen didn't bid for Formosa Petrochemical shares.

"We are more inclined to hold shares of Formosa Plastics and Nan Ya Plastics, which are more able to catch the demand upturn because of their integrated operations," Shen said.

"They are less exposed to the volatility of crude oil prices," Shen said.

Formosa Petrochemical forecasts profit will rise to NT$18.6 billion, or NT$2.30 a share, next year from a projected NT$17.9 billion, or NT$2.28 a share, this year. Sales may rise to NT$241.4 billion next year from NT$223.4 billion this year.

The initial public offer attracted 129,551 bids, with every winning bid eligible for 2,000 shares. Successful bidders will be chosen by lottery on Dec. 9.

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