CSE places proposals to SEC on book building method

FE Report (June 09, 2011)

The Chittagong Stock Exchange (CSE) has proposed the SEC to fix the indicative price of a company willing to go public under revised book building method based on its weighted average of fundamentals.

The CSE officials placed a series of proposals to the SEC in this connection ahead of probable amendment to book building method.

“We placed the proposals to the Securities and Exchange Commission (SEC) recently in a move to help the securities regulator in this connection,” said the CSE president.

According to CSE proposals, the indicative price of a company will be the weighted average of its 25 per cent of net asset value (NAV), 25 per cent of past earning per share, 30 per cent of future earning per share, 10 per cent of price earning (P/E) ratio of similar stock and 10 per cent price book value ratio of similar stock.

Earlier, the SEC proposed an indicative price, which will not exceed the average P/E ratio, calculated on the average earning of preceding three years or five times of net asset value, whichever is lower but not less than NAV per share.

CSE's draft proposal stated the issue manager must follow the due diligence list provided by the SEC during calculating P/E ratio and book value ratio of similar stock.

It proposed not to allow the calculation of EPS by annualising latest quarterly financial statement or semi-annual EPS.

It also proposed mandatory registration of the valuer company with the SEC, which will determine the criteria of such firms.

The CSE also proposed for a provision for institutional investors to offer price in the range of 10 per cent up and down of the indicative price.

It further proposed for an expert panel comprising the representatives of Institute of Chartered Accountants of Bangladesh (ICAB), Institute of Cost and Management Accountants Bangladesh (ICMAB) and both the bourses to scrutinise and verify the audited financial statements submitted seeking permission for going public.