Kuala Lumpur - Fundraising from Malaysian initial public
offerings is poised to rebound from the lowest in 16 years, led by a planned
relisting of the local KFC operator, as receding uncertainty and commodity
price gains help rekindle demand for riskier assets.
First-time share sales in Malaysia, Southeast Asia’s
top destination for new listings less than five years ago, fell to $305 million
in 2016, according to data compiled by Bloomberg. The figure was the lowest
level since 2000 and trailed other regional exchanges including Singapore,
which hosted $1.7 billion of IPOs, and Thailand, where $1.5 billion was raised,
the data show.
While a volatile ringgit and slower economic growth hurt
IPO volumes last year, fundraising could jump to at least $2 billion in 2017,
according to CIMB Group Holdings Bhd., Malaysia’s top IPO arranger. QSR
Brands, the fast-food franchisee backed by CVC Capital Partners, is preparing a
$500 million share sale, people with knowledge of the matter said earlier.
Property developer Eco World International said in October it plans to seek
more than 2 billion ringgit ($444 million) in an IPO.
“Large IPOs planned for 2017 are expected to reignite
investor interest,” Kong Sooi Lin, chief executive officer of CIMB’s investment-banking
arm, said in an interview. “If post-IPO performances listings are strong, we
could see a rub-off effect where more private companies may decide to go
public.”
Rising prices
QSR Brands, which runs more than 730 KFC outlets and 390
Pizza Hut eateries in Southeast Asia, is returning to the Malaysian stock
market after being taken private in 2013 by CVC, Employees Provident
Fund and Johor. The company picked Citigroup, Credit Suisse Group and
Malayan Banking to lead its IPO, people with knowledge of the matter said in
October.
Malaysia, the only net oil exporter in Asia and the
world’s second-biggest palm oil producer, saw its currency weaken more than 4
percent in 2016. Brent crude oil prices, which hit a decade low last
January, rallied more than 50 percent to about $57 per barrel and could rise
further in 2017 as the Organization of Petroleum Exporting Countries vows to
trim output. Benchmark palm prices in Malaysia climbed 22 percent last year.
The recovery could provide a boost to Serba Dinamik
Holdings, an oil and gas services provider that’s taking orders for an IPO of
as much as 584.1 million ringgit. Edra Global Energy, Malaysia’s second-biggest
independent power producer, is considering a $400 million first-time share sale
as soon as this year, people familiar with the matter said in October.
Read also: KFC spreads its wings in Myanmar
Listings that have been delayed could return in 2017 as
confidence in the market increases, Ramesh Manimekalanandan, head of Malaysia
equity capital markets at Maybank Investment Bank Bhd., said in an
interview. Lotte Group shelved plans to list its Malaysian petrochemicals
business, which could have raised more than $500 million, people with knowledge
of the matter said in June.
Domestic liquidity
Other companies that have postponed share sales include
Weststar Aviation Services, a provider of helicopter transport backed by
KKR & Company that was planning to seek at least $300 million in a 2015
IPO, and Sime Darby Bhd.’s car dealership unit, which was aiming to raise as
much as $900 million that year, according to people with knowledge of the
matter.
Iskandar Waterfront Holdings, a real estate developer, is
considering reviving an IPO this year, Lim Kang Hoo, executive vice
chairman, said in an October 7 interview. The company may pursue a dual listing
in Malaysia and Hong Kong or Singapore as it seeks to monetise some of its
assets valued at more than 30 billion ringgit, he said.
Read also: KFC wins payout over 'mutant chicken' rumours
Robert Huray, head of investment banking at RHB Bank,
said investors have greater confidence about 2017 since the US presidential
election has passed and oil prices have stabilised. Companies that have been
waiting for better market conditions may decide to proceed with listing plans
now to raise needed funds, as borrowing costs are rising, according to James
Lau, a Kuala Lumpur-based investment director at Pheim Asset Management.
Any revival in listings will be supported by Malaysia’s
abundant domestic liquidity, said Steve Clayton, senior country officer at
JPMorgan Chase & Company. The nation’s top two pension funds, Employees
Provident Fund and Kumpulan Wang Persaraan (Diperbadankan), manage more than
$180 billion of assets and have more than 70 percent of their investments in
Malaysia, according to their websites.
“The local IPO market is set to rebound because there’s a
greater degree of predictability in 2017, now that most of the uncertainties
that we have seen in 2016 are fading,” said Danny Wong Teck Meng, chief
executive officer of Areca Capital in Kuala Lumpur. “There’s light at the end
of tunnel.”
BLOOMBERG