Capitamall Asia IPO

By Paul on December 3rd, 2009

When the IPO was first launched, it received much fanfare and hype. We can see that it was oversubscribed due to the great interest in a great brand name and that it is the 2nd largest IPO, $2.8B, ever.

The lure of a huge potential upside to growth in China with a good management behind it, I badly wanted to chase it as well. But learning from past mistakes, I decided to do some due diligence on research. Part of this is to allay my fears and feelings on making a decision on this stock.

I had some concerns as there’s a growing fear of an asset bubble in China. Such fears always accompanies high growth regions. Much hinges on how the countries manage growth. I’ve read through reviews and the IPO prospectus. Basically, Capitamall Asia is really spinning of a lot of money for its parent, Capitaland. No doubt, much of it will be use to fund growth. Based on its price, the P/B ratio is high (1.45 to 1.75) compared to similar stocks like REITs (Do not that Capitamall Asia is not a REIT). This makes me a little uncomfortable also. I’d rather go for those below NAV like Capitamall Trust? Basically, people are paying for the brand. P/B ratio is one of the key aspects in which i screen my stock selection.

The itch in me pushed me to bid for 1 lot, a sure get. But I promised myself that I would offload it within a week when the euphoric sentiment still exists.

So I got 1 lot at $2.12 and offload at $2.33. Today it rose to $2.4 and above. Should I pinch myself for it? I guess not. Let’s see how it performs in the long run.

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