Malaysia: Lining up for IPOs

Malaysia’s capital markets are looking forward to another good year for initial public offerings (IPOs) in 2012, with a number of companies set to list on the nation’s exchange.

So far, 2011 has been a solid year for IPOs on Bursa Malaysia. Up to mid-November, there were 26 new listings, just short of the 29 for all of 2010. Though it is unclear whether there will be any major new launches for the final month of the year, which is usually a bit slow, initial indications are that next year will see some top flight firms going public. Several blue chip companies are expected to float shares, which should attract a wave of investors to the market.

According to Tajuddin Atan, the chief executive officer of Bursa Malaysia, the resilient nature of the country’s economic fundamentals has shored up interest in IPOs, though the success of new launches depend to a degree on their timing.

“The IPO pipeline is strong,” he said on November 9. “The index is holding up very well despite the volatility. When the market comes back they will rebound well. ”

Though many investors were keeping a close eye on developments in the US and Europe, where any weakening of the economic situation could harm confidence, Tajuddin said IPOs scheduled for the new year, including for a key unit of plantations operator Federal Land Development Authority, also known as FELDA, would attract local and foreign investors.

By having blue chip firms listed on the exchange, Tajuddin said Bursa Malaysia itself would be increasingly seen as a quality product and thus facilitate a move from speculative to fundamental investing.

“The retail players we are looking at now are fundamental investors, which is the shift Bursa is looking to achieve,” he said.

The coming year’s IPOs may well help Bursa Malaysia make that shift, as long as the global market holds up. In late October, local and international media carried reports that FELDA had contracted CIMB Investment Bank, Maybank Investment Bank and Morgan Stanley to manage the IPO of its commercial arm, with Deutsche Bank and JPMorgan Chase set to be the deal’s book runners.

As of mid-November, this had not been officially confirmed, though it was none other than Prime Minister Najib Tun Abdul Razak himself who announced in early October that Felda Global would be listed on the local exchange. In his budget speech of October 8 the prime minister said the listing would “create another blue-chip plantation company besides attracting international investors to Bursa Malaysia”.

Estimates suggest that FELDA could be looking to raise up to $1bn from its IPO, which is likely to be staged in the first half of 2012, international media reported. FELDA has already floated one of its units, sugar producer MSM Malaysia Holding, in June, with the company valued at $824m and the IPO massively oversubscribed.

Another potential top flight offering in the pipeline could come from Integrated Healthcare Holdings, the region’s leading hospital operator, which is apparently looking to raise up to $2bn through an IPO. In early November, the Bloomberg news agency reported that the firm, which is controlled by Khazanah Nasional, Malaysia’s sovereign wealth fund, had asked a number of banks to lodge proposals on handling the offering.

Integrated, which already has a chain of hospitals across the region, including in Malaysia, Singapore and India, has been conducting an aggressive expansion programme over the past year. In June it offered $2.7bn for Parkway Holdings of Singapore and is in talks to acquire a majority stake in Turkish health services provider Acıbadem Sağlık Hizmetleri & Ticaret for around $1bn.

Of course, much depends on the health of the global economy and that of Malaysia itself for these IPOs to be successful. The fact that neither Integrated nor FELDA have made public announcements on the timing of their listings could mean the two companies are making sure the timing and financial climate are right before they launch their offers.

In an advisory note issued in late October, MIDF Research said that global uncertainties could impact the IPO market, with some firms opting to adopt a wait-and-see approach.

“With global uncertainty and expected weaker investor sentiment, capital market fund raising via IPOs is expected to be slower moving into the fourth quarter. Thus far, only Gas Malaysia has been slated for a listing in the fourth quarter,” the note said.

With so much at stake for blue chip firms like FELDA and Integrated, as well as other companies mulling the idea of going public, timing will be crucial to their success in the markets.

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