Petronas Chemicals Group Bhd, a unit of Malaysia's state oil company, said it raised RM12.8 billion ($4.1 billion) in Southeast Asia's biggest initial public offering this year after pricing shares at the top of its projected range.

Shares were priced at RM5.20 each for institutions, the Kuala Lumpur-based petrochemicals company, owned by Petroliam Nasional Bhd, said in a statement today. Demand exceeded supply, with the institutional offering attracting orders for about RM92.6 billion worth of shares, it said.

'We are delighted with the investors' response to the offering,' Petronas Chemicals chairman Wan Zulkiflee Wan Ariffin said in a statement. 'The book-building exercise attracted significant interest from various types of investors globally.'

The benchmark FTSE Bursa Malaysia KLCI Index rose 18 percent this year and reached a record on Nov. 10, as international investors purchased more of the nation's stocks than at any time since at least 1995, according to data compiled by EPFR Global. The IPO values Petronas Chemicals at RM38.8 billion, or 16.3 times profit, a 38 percent premium to the industry median.

Asia Interest

'The environment is good for them,' said Katherine Schapiro, a San Francisco-based manager at Sentinel Asset Management Inc., which oversees $20 billion. 'There's a lot of demand for Asian stocks, especially big ones.'

Banks advising on the sale set an indicative price range of RM4.50 to RM5.20 per share for institutions, two people familiar with the matter said on Oct. 26. Individual investors will get a 3 percent discount, according to its prospectus.

CIMB Group Holdings Bhd, Deutsche Bank AG and Morgan Stanley are managing the IPO, while Citigroup Inc. and UBS AG are co-bookrunners for the portion of the sale to institutional investors, according to the prospectus.

At the midpoint, the IPO would give government-owned Petronas a 184 percent return on its per-share stake valued at RM1.71, according to the prospectus and Bloomberg data.

The sale would eclipse the record $3.3 billion IPO from Kuala Lumpur-based Maxis Bhd, Malaysia's biggest mobile-phone operator, last year and lift the nation's initial offerings to an all-time high, the data show.

Investment Plan

Petronas Chemicals, formed through the combination of more than 20 companies, will offer 2.48 billion shares for a 31 percent stake, the prospectus said. Petronas will get 72 percent of the proceeds, while the chemicals unit plans to use the remainder to build facilities and fund acquisitions.

Petronas Chemicals intends to pay 50 percent of annual earnings as dividends to shareholders, the prospectus said.

Wan Zulkiflee, the company's chairman, said on Nov. 2 it may invest as much as $1 billion in an ammonia and urea plant in eastern Malaysia that will use the nation's natural-gas reserves in that area. Malaysia is the world's second-largest supplier of liquefied natural gas.

Petronas's holding in Petronas Chemicals was valued at RM12.47 billion, or RM1.71 a share, at the time of the unit's formation, the prospectus said. The midpoint IPO price would make Kuala Lumpur-based Petronas Chemicals one of Malaysia's 10 largest publicly traded companies, the data show.

Not Cheap

Buyers would be paying about 16.3 times profits, based on the RM1.19 billion the unit earned in the six months ended Sept. 30, the prospectus and data compiled by Bloomberg show. That compares with the median 11.8 times estimated earnings for 31 petrochemical companies globally, which gained an average of 47 percent so far this year.

Honam Petrochemical Corp., the Seoul-based maker of ethylene that is acquiring Malaysia's Titan Chemicals Corp., trades at 8.1 times estimated profit. The shares have more than doubled in 2010.

'Petronas Chemicals is not coming to the market cheap,' said Christopher Wong, a Singapore-based senior investment manager for Asian equities at Aberdeen Asset Management Plc, which oversees $267 billion. 'It's quite encouraging for the Malaysian market to see appetite for risk.'

The valuation for Petronas Chemicals reflects a premium of 8.9 percent to shares in Malaysia. The 30 companies in the FTSE Bursa Malaysia KLCI Index trade at an average 14.97 times profit in the next 12 months after the gauge climbed to a record 1,528.01 on Nov. 10, data compiled by Bloomberg show.

Capital Flow

The stock index exceeded the previous high in January 2008 as investors poured more than $355 million into Malaysian equity funds on a net basis in 2010, data compiled by Cambridge, Massachusetts-based EPFR Global show. Asian IPOs have attracted a record $142 billion this year, Bloomberg data show.

'There's a lot of money heading into Asia,' said Greg Lesko, who helps oversee $750 million at New York-based Deltec Asset Management. 'For some of the larger funds, deals like this are opportunities to get reasonably well invested.'

The Employees Provident Fund and Kumpulan Wang Persaraan (Diperbadankan), two of Malaysia's state-controlled retirement funds that oversee more than $150 billion, will buy 18 percent of the offering as strategic investors, the prospectus said.

The IPO of Petronas Chemicals is part of Prime Minister Najib Razak's plan to attract more overseas investment by selling state-owned assets. The government eased rules last year that forced publicly traded companies to set aside 30 percent of their equity to ethnic Malays who form the majority of the population.

State Divestment

Malaysia Marine and Heavy Engineering Holdings Bhd., the Kuala Lumpur-based rig-building arm of Petronas's MISC Bhd., raised about RM2 billion last month in the nation's biggest IPO so far this year. Institutions placed orders for 27 times the number of shares they were allocated.

The country's finance ministry may also divest its holdings in Percetakan Nasional Malaysia Bhd, the state-owned printing company, CTRM Aero Composites Sdn., an aerospace components maker, and two biotechnology companies, Najib said in March.

Malaysia's economy is projected to expand 6.7 percent in 2010, the fastest in six years and more than twice the pace of industrialized nations, according to the Washington-based International Monetary Fund.

'It's a very significant step forward for Malaysia,' said Michael Holland, who oversees more than $4 billion as chairman of Holland and Co. in New York. 'It's one more indication of how the Asian countries are beginning to be the beacon of strength.'

Bloomberg