SHARES in MLABS Systems Bhd, which was listed on Mesdaq last Friday, continued to fall on its second trading day, dropping 5 sen to 34.5 sen yesterday, and drifting further from its initial public offer (IPO) price of 55 sen.
On its listing debut on Friday, the stock closed at 39.5 sen, off its intraday high of 53.5 sen, on volume of 18 million shares. The counter has lost some 37% since the listing.
According to a head of research with a local brokerage, MLabs’ share price was “slightly overpriced'', at 13 times its annualised earnings per share (EPS) of 4.2 sen based on its net profit for its first half-year ended June 30.
He said based on EPS of 4.2 sen, the multimedia video conferencing systems provider was currently trading at a price-to-earnings ratio of 8.2 times, which was closer to the brokerage's fair value of 31 sen for the stock.
The head of research said the weak market sentiment, coupled with a lack of confidence in Mesdaq counters, had contributed to the selling pressure on the newly listed counter.
“MLabs’ technology is no rocket science,” he said, noting that there were many IPOs on Mesdaq this year that did not generate much return for investors.
A dealer at another brokerage concurred. “It’s quite difficult to see the company’s growth outlook. Unless the fundamentals are very strong, investors are not going to jump in to buy the shares when the sentiment is so weak,” he said.
He added that it was likely that investors were not convinced by the company’s business model. MLabs derives some 55% of its revenue from the local market and the rest from exports to India, Thailand, Singapore, Australia, Vietnam, Libya, the Netherlands and the US.
On Tuesday, MLabs announced a net profit of RM1.6mil for the first half ended June 30 on revenue of RM3.1mil.
Another dealer said investors who were issued the shares via private placement could be selling as well, thus further dampening the share price.
MLabs’ listing exercise had involved the issuance of 26.15 million new shares, of which two million were offered to the public, three million to eligible employees and business associates, and 21.15 million to selected investors via private placement. The public tranche was reported to be oversubscribed by 13.83 times.
Of the estimated RM14.4mil raised, the company plans to use RM3.2mil for capital expenditure, RM1.5mil for business expansion, RM2.3mil as working capital, RM2.4mil to repay borrowings, RM2.4mil on research and development and the remaining RM2.6mil for listing and marketing expenses.