KUALA LUMPUR: The country’s top investment bankers say the credible performance of large new listings here this year is aiding their IPO deal pipelines amid the volatility in stock markets.
“Strong demand for Malaysian IPOs and the good performance of these deals after listing have created a virtuous circle. Confidence in the IPOs and in the aftermarket breeds more confidence in the following one and that is reinforced with each succeeding transaction,” said Datuk Charon Wardini Mokhzani, CEO of CIMB Investment Bank Bhd.
Charon says CIMB'sdeal pipeline is 'lookinghealthy' on the back ofstrong liquidity in themarket.
CIMB, together with Malayan Banking Bhd (Maybank), was joint principal adviser and joint managing underwriter for the US$3.3 billion listing of Felda Global Ventures Holdings Bhd (FGV) in June this year, the world’s second biggest IPO after Facebook Inc’s US$16 billion offering in May.
CIMB was also principal adviser for the US$2 billion IPO of IHH Healthcare Holdings Bhd in July. Both banks are also playing key roles in the floatation of billionaire T Ananda Krishnan’s pay TV concern Astro Malaysia Holdings Bhd that is expected to raise US$1.75 billion later this month.
While state-mandated deals helped propel Malaysia to the No 3 spot for new listings after the US and China so far this year, the resilience seen in a number of IPOs here, despite global volatility, has won Bursa Malaysia praise from even the CEO of the Singapore Exchange, Magnus Bocker.
He had said in late August that Malaysia’s large IPOs created better sentiments for investors to come into the market and he expected a more vibrant second half with several billion-dollar deals in the pipeline.
Datuk Tajuddin Atan, CEO of Bursa Malaysia, is also expecting “a few more large, quality listings” to come to market by year-end. “We expect the number of companies considering listing in Malaysia will improve in tandem with the resilience and growth of the domestic and regional economy.”
Amid the uncertain global economic situation that has bogged down market sentiments, investor’s are hungry for dividend yielding stocks.
This has helped shore up demand for unconventional investments such as real estate investment trusts (REITs) and business trusts that are both marketed as dividend plays but with different risk profiles.
This is evidenced by how the IPOs of Main Board-bound IGB REIT and that of Far East Hospitality Trust, which debuted on the SGX on Aug 27, were priced at the top of their indicative price ranges.
Tengku Zafrul: The trendof IPO's we've seen in 2012 we foresee will continue into 2013.
“The trend of IPOs we’ve seen in 2012 we foresee will continue into 2013 as there remains strong demand for quality equity offerings across both domestic and international institutional investors,” Tengku Zafrul Tengku Abdul Aziz, CEO of Maybank Investment Bank, told The Edge Financial Daily, letting on that a number of other equity transactions are in the pipeline still.
Charon, too, sees CIMB’s deal pipeline “looking healthy” on the back of strong liquidity in the marketplace.
“We see strong support and liquidity from domestic funds, both government-linked and private sector, domestic high net worth investors ... demand [from international investors] has been evident in recent deals,” he said.
The impending introduction of guidelines to allow the listing of business trusts in Malaysia, for instance, could provide an alternative platform for companies such as 1Malaysia Development Bhd (1MDB) and even telecom companies like Axiata Group Bhd, which could choose to spin off telecommunications towers to raise cash for expansion, financial executives say.
Unlike REITs, which allow only a maximum of 10% of assets to be in the development stage, business trusts — which are already allowed in Singapore and Hong Kong — are free hand to have a lot more development assets in their portfolios.
State-owned 1MDB, which has in the past six months grown itself into the country’s second largest independent power producer (IPP) after buying assets from Ananda and the Genting Group, is said to be mulling a US$2 billion IPO of power assets in the first quarter of next year.
1MDB is also the master developer of the Tun Razak Exchange (TRX), a gargantuan 70 acre (28ha) real estate project in the heart of Kuala Lumpur that Malaysia hopes to turn into an international economic and financial hub by leveraging its lead in Islamic Banking as well as infrastructure project financing.
Amendments made to the Capital Markets and Services Act 2007 (CMSA) already give the Securities Commission the power to register and regulate business trusts as well as their trustee-manager. The CMSA (Amendment) Act 2012, which has been passed by parliament and entered into the Federal Gazette in July this year, will be in force once an effective date is determined by the finance minister.
Other companies exploring the IPO market include Tan Sri Syed Mokhtar Al-Bukhary’s power company Malakoff Corp Bhd, the world’s largest condom maker Karex Industries Sdn Bhd, and businessman Tan Sri G Gnanalingam’s Westports Malaysia Sdn Bhd.
Whether or not these listings help keep Malaysia ahead in the IPO league table, what’s certain is it will need to win more listings from privately owned enterprises to earn greater recognition as a choice IPO marketplace.
“We would like to believe the Malaysian market will remain open throughout 2012,” Charon said.
This article is appeared in The Edge Financial Daily on 10 September, 2012.