Sunday, April 21st, 2019
PETALING JAYA: Faced with heavy sell-off in the local bourse, the initial public offering (IPO) market has been weak this year. Looking at the current situation, the recent postponement of QSR Brands (M) Holdings Bhd IPO may indicate that this is not the best timing for new listings.
Association of Corporate Finance Advisers chairman Datuk Wan Asmadi Wan Ahmad told SunBiz that based on the current performance of the local market, those seeking valuation premium from the listings are expected to postpone their IPOs as the valuations may not meet the parameters expected by the IPO candidates.
Just over a week ago, QSR and its shareholders decided to re-time its IPO following discussions with its bankers. The IPO could have raised as much as RM2 billion but it was postponed as potential investors balked at its valuations. If it had gone ahead, QSR would have been the biggest IPO in Malaysia in about two years.
Wan Asmadi, who is also DWA Advisory Sdn Bhd managing principal, said for Main Market listing, IPO candidates will always be there but they are more likely to proceed when the market situation improves.
“Large main market listings would need to attract cornerstone investors, asset management companies and retirement funds as their target investors and thus market appetite of these funds managers would need to be carefully gauged before launching of any listing. As for the ACE and LEAP markets, the takers would be mostly private investors, including high net worth and sophisticated investors that may look for good upside especially in the current market situation,” he explained.
Nonetheless, he said an IPO remains a viable alternative for candidates seeking to raise funds and enhancement of equity capitalisation, especially for ACE and LEAP Markets, which cater more to small and medium enterprises.
“We expect last year’s trend to continue to this year and more IPOs will be launched in the second half of this year, hopefully when the situation is more certain and positive economically,” said Wan Asmadi.
Bursa Malaysia has seen five listings on the ACE Market and the LEAP Market this year, raising RM112.66 million so far. This compares with 22 IPOs last year which raised RM633.12 million. There were 11 listings on the LEAP Market, nine on the ACE Market and only two on the Main Market in 2018, namely Mi Equipment Holdings Bhd and Techbond Group Bhd.
Upcoming listings are Smile-Link Healthcare Global Bhd (tomorrow) and TT Vision Holdings Bhd (May 9), both on the LEAP Market.
IPOs in the Main Market pipeline include the likes of HPMT Holdings Bhd, Leong Hup International Bhd, UWC Bhd and AME Elite Consortium Bhd.
Meanwhile, IPOs in the ACE Market pipeline are Tashin Holdings Bhd, Mattan Bhd, Greatech Technology Bhd, SDS Group Bhd, Mestron Holdings Bhd, I-Stone Group Bhd, Kim Hin Joo (Malaysia) Bhd, Spring Art Holdings Bhd, MTAG Group Bhd and Solarvest Holdings Bhd, among others.
Prime Minister Tun Mahathir Mohamad has said the government was considering listing state-owned entities on the stock market as part of efforts to reduce debt and liabilities.
During the tabling of Budget 2019 last year, Finance Minister Lim Guan Eng had also mentioned the government’s plans to set up an airport real estate investment trust for the “securitisation” of government assets.
An investment banker who declined to be named said the IPO market remains positive as interest in IPOs has increased compared with last year, based on enquiries from companies indicating their interest to list.
“You may not see a mega IPO like QSR but there is more interest from the smaller companies compared with last year,” the corporate financer of an investment bank said, noting that the number of companies going for listing on the Main Market and the ACE Market this year should be higher than last year.
He explained that there is always more interest for listing on the ACE Market and the LEAP Market compared to the Main Market and this is not something worrisome.
“We shouldn’t just focus on big IPOs. We should also focus on the smaller companies where we can help them to raise funds to help them to grow their business to the next stage, which is also important for the capital market.”
He said there is more and more interest for IPOs now following the revival of the East Coast Rail Link project, a sign that things are better compared to previously where projects were under review and there was no clear direction from the government.
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research said its strategy to seek high dividend yielders remains unchanged and the recent market sell-down further solidifies the need to stay defensive.
The FBM KLCI has skidded to its lowest level since late-2016 to close at 1,622.07 points last Friday following news of Malaysia’s possible removal from the World Government Bond Index (WGBI).
Besides high yielders, the research house said, investors can look out for selective exporters (weakening ringgit), while those looking for rebound plays can consider “beta oversold” stocks.
“For the yield angle, we like selective REITs (IGB REIT and MQ REIT), Maybank for large cap liquid yield, BAuto (strong earnings growth), Taliworks (resolution of Splash water deal) and LiiHen (export play).
“Also, our earlier view for a sequentially weaker ringgit in Q2 vs Q1 remains unchanged (-1.4% thus far into Q2). In this regard, we like Top Glove and recently also upgraded our rating on Hartalega to buy.”
HLIB Research said the only slight change to its second quarter 2019 (Q2’19) strategy is that it is turning warmer on construction in view of pump-priming resumption.
“While the sector remains a neutral (albeit with a positive bias), we think there could be plays on laggards such as Kim Lun and Hock Seng Lee.”
In light of the market weakness, the research house screened its coverage to identify which socks have been oversold year-to-date versus the FBM KLCI on a beta adjusted basis for possible bottom nibbling ideas.
“Stocks that have been oversold by more than 5% on a beta adjusted basis that we have buy ratings include Hartalega (oversold by -18.5%), Pharmaniaga (-17.8%), Top Glove (-17.6%), IOIPG (-10.2%), AirAsia (-8.8%) and Homeritz (-5.6%).”
HLIB Research is maintaining the FBM KLCI earnings growth forecast of 2.1% for 2019 and 4.5% for 2020, while the FBM KLCI target is 1,710 points.
Meanwhile, the research house said the emphasis by the government on pump priming the country’s economy is welcome news.
“While economic expectations have been lowered, the silver lining is that pump priming is being resuscitated.”
After renegotiations, major infrastructure projects, MRT valued at RM30 billion, LRT3 at RM16 billion are expected to resume construction by the middle of this year and, most recently, the East Coast Rail Linkhas been resuscitated at a lower price of RM44 billion and a higher local content of 40%, it noted.
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PETALING JAYA: Cagamas Bhd has issued its RM300 million three-month conventional commercial papers (CCP), the proceeds of which will be used to fund the purchase of housing loans from the financial system.
President and CEO Datuk Chung Chee Leong said the issuance concluded raises the company’s outstanding conventional corporate papers to RM1.05 billion, representing 16% of the overall short-term local currency bond market domestically.
“The CCP was priced via a public offering representing the company’s first book building exercise for the year, which received overwhelming response evidenced by a commendable bid-to-cover ratio of over three times,” he said in a statement.
Chung said the CCP was competitively priced at the lower end of the initial price guidance, which was seven basis points lower than the three-month Kuala Lumpur Interbank Offered Rate.
“Orders were received from a diversified pool of investors including financial institutions and insurance companies,” he added.
The papers, which will be redeemed at their full nominal value upon maturity, are unsecured obligations of the company, ranking pari passu among themselves and with all other existing unsecured obligations of the company.
PETALING JAYA: Malaysia needs to prioritise its manufactured exports and simultaneously adopt a more effective and aggressive export promotion strategy, according to AmBank Research.
“Our focus should be in areas where we currently enjoy a strong rising comparative advantage like in areas such as petroleum products, natural gas and manufacturers, and base metal in resource-based activities, and E&E (electronics and electrical) in the non-resource-based segment.
“We should also look at areas where we had no comparative advantage before but now gaining comparative advantage such as beverages, paper & paper products, chemicals, coal, coke & briquettes in resource-based activities, and others under the non-resource-based segment,” the research house said its in thematic report last Friday.
Its chief economist Anthony Dass partly attributed the decline in manufactured export to the downturn in the electronics and electrical industry. E&E contribution to manufactured exports dropped to 21% in 2017 from 75.1% in 2001.
“Furthermore, our manufacturing exports also face a number of challenges. Most notable is China and at the same time, the increasingly stiff competition from our Asean peers”.
Malaysia still enjoyed comparative advantage between 1998 and 2017, but lost its comparative advantage, critically to both Thailand, which surpassed Malaysia in 2015, and Vietnam in 2017. Singapore also further widened its comparative advantage against Malaysia.
While trade liberalisation is one of the measures to address the issue, Anthony said it will not improve the country’s competitiveness as trade liberalisation is focused only on lowering tariffs for final goods.
“So, it has to be more comprehensive and should focus on both final and intermediate goods. At the same time, we need to aggressively promote Malaysia as the regional services hub for global multinationals.”
The report said that the E&E sector is hurt because it caters more for further processing in regional production networks which in turn produce for the world market.
“While we do export consumer electronics, especially to developing countries, they are increasingly facing competition from lower cost producers”.
One of the main challenges faced by Malaysia’s manufacturing export is China’s growing dominance in the global export market of manufactured goods, and at the same time the increasingly stiff competition from the Asean peers are causing headwinds to the country’s manufactured exports.
“It is because our exports are trapped in low value-added activities, making it difficult to move up the value-added chain. We still depend on low-level technology with little innovation or creation of new technology that provides a new competitive edge to our industries. Hence, we notice the average growth from non-resource-based activities is only 4.1% compared with 8.8% from resource-based activities between 2001 and 2017.”
PETALING JAYA: Malayan Banking Bhd (Maybank) expects a 15% rise in ASB unit trust investments at the week-long Minggu Saham Amanah Malaysia (MSAM) 2019 in Sungai Petani, Kedah, totalling some RM120 million compared with RM104 million at the MSAM last year.
In a statement released today, the bank said the anticipated increase is based on the continued confidence of customers investing in ASNB products as well as the convenience provided through Maybank’s digital channels.
“MSAM events serve as an ideal avenue for the public to understand more about saving for the future and the various investment options available in the market. Today, with the wide range of products we offer – including those by ASNB, as well as the availability of investing via digital channels, customers can enjoy the benefit of obtaining sufficient information on how to invest smartly based on their risk appetite” said Maybank head of community financial services Malaysia Datuk Hamirullah Boorhan.
Maybank has garnered a total of over RM6.1 billion of ASNB investments in the first quarter this year.
“We are hoping to record over RM25 billion of ASNB investments by the close of the year,” he said.
At the event, Maybank also launched its new online application service for ASB financing which is available via the Maybank App. With this new service, existing customers will be able to apply for ASB financing on-the-go. Non-existing customers can also apply via the Maybank App but will need to visit the branch for verification purposes.
“Our intention is to simplify our customer’s on-boarding process as well as to enhance their online experience. The new service will also improve the loan processing time and provide faster loan approvals and disbursements.”
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