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.”
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.
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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.
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.
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