IPOVIEW-Master limited partnerships shine in lackluster IPO market

Wed May 21, 2014 3:39pm EDT

May 21 (Reuters) - The initial public offerings of two master limited partnership (MLP) companies stood out in a market where investors are beginning to take a closer look at valuations.

Share offerings of PBF Logistics LP and GasLog Partners LP were priced at or above their expected range in May, bucking a trend of under-priced IPOs.

PBF Logistics' offering was priced $2 above the range, while GasLog's was priced at the top end among the 14 IPOs priced so far this month.

"(Investors) are actually looking at the financials rather than going for the sexy cloud-based software-as-a-service IPOs," said Scott Sweet, senior managing partner at IPO Boutique.

Chinese online cosmetic retailer Jumei International Holding was the third company whose shares were priced above the range this month.

Shares of both PBF Logistics, formed by PBF Energy Inc to operate oil and refined petroleum logistics assets, and LNG tanker operator GasLog also registered strong gains on their first outing on the exchange.

GasLog's shares are up more than 27 percent while those of PBF have gained 18 percent since listing, a sign that investors are veering towards stocks that offer steady returns.

"Tech stocks are more expensive than MLPs, but MLPs have the income and stability," said Jack Ablin, chief investment officer of BMO Private Bank.

"I would call MLPs as no-news-is-good-news asset class whereas tech stocks need a catalyst to continue to advance," he added.

The only other company to outperform the MLPs is technology firm Zendesk Inc, whose shares are up nearly 88 percent since their listing on May 15.

Nearly half of the 27 companies that went public in April were priced below their expected range, making it the worst month for IPO pricing since June 1998, according to Thomson Reuters data.

In contrast, out of the 29 IPOs in March, only two were priced below their expected range, while five were priced above.

A weak IPO market is likely to cast a shadow on the big Chinese internet retailers that are looking to go public in the United States.

China's JD.com is expected to price later on Wednesday, while Alibaba IPO-ALIB.N is getting ready for an U.S. offering that is being billed as the largest IPO in the technology space. (Editing by Sriraj Kalluvila)