IOI Corporation Berhad : IOI Properties soars in debut

KUALA LUMPUR: IOI Properties Group Bhd soared by a quarter in its first day of trade, an auspicious start to 2014 for Malaysian listings as the market regains its mojo after being hit by election jitters last year.

Malaysia's initial public offering market could more than double this year to US$7.1 billion, led by an up to US$2 billion sale of state investor 1Malaysia Development Bhd's energy assets, according to information from bankers compiled by Reuters.

The resurgence in IPOs will be underpinned by strong investment appetite from big local funds like the Employee Provident Fund, which will make Malaysia less susceptible than other emerging markets to any capital outflows related to the US Federal Reserve's tapering of stimulus, senior bankers said.

"We do expect Malaysia to feature as a prominent destination in Asia for both IPOs and follow-on equity offerings this year," said Tengku Datuk Zafrul Aziz, chief executive of CIMB Group Holdings Bhd's investment banking arm.

"Even when there were foreign fund outflows in the fourth quarter last year, the healthy stock market performance showed that this was well absorbed... liquidity is well supported by strong pools of domestic money," he said.

Shares in IOI Properties ended up 25 per cent higher at RM3.15, giving it a market cap of RM10.2 billion and putting it neck-and-neck with UEM Sunrise Bhd for the title of Malaysia's biggest property firm. At one point, the stock hit a high of RM3.56.

The company was spun out of Malaysian tycoon Tan Sri Lee Shin Cheng's plantation firm IOI Corp Bhd via an in-specie distribution and a restricted sale offer to shareholders of IOI Corp, raising US$580 million to repay debt.

An in-specie distribution is one where an asset itself is distributed, rather than one where the asset is sold and cash is distributed.

Like 1Malaysia Development Bhd's power plant assets and IOI Properties, many prospective listings are set to come from the energy and real estate sector. These include an up to US$1 billion IPO from power producer Malakoff Bhd, a unit of MMC Corp and a US$300 million offering from property developer Iskandar Waterfront, banking sources have said.

Others include a US$250 million offering from Seven Convenience Bhd, which operates 7-11 stores in Malaysia and mobile operator Axiata's planned US$500 million offering of its tower assets.

The potential US$7.1 billion in IPO proceeds this year would come close to Malaysia's record of US$7.6 billion in 2012, when the country ranked fifth in terms of global IPO destinations.

The figure does not include two possible deals where the size has not been flagged - a property trust listing from Permodalan Nasional and an IPO for Boustead Plantations.

Seven Convenience, Malakoff, Weststar, Axiata and Boustead Plantations have said they plan to list. Permodalan Nasional and Iskandar Waterfront were not immediately available for comment.

The jump in IPOs for Malaysia comes amid a robust outlook for much of Asia Pacific ex-Japan, with at least US$88 billion worth of deals expected in the region this year, led by China and Hong Kong, according to estimates from consultants and bankers. That compares to about US$48 billion in 2013.

IOI Properties' restricted initial public offering created pent-up demand among institutional investors, said a institutional dealer with a local investment bank and who bought shares in the company.

"From the get-go, investors snapped up the shares as the market has waited for five years for a chance to pick up IOI Properties rather than going through IOI Corp to get exposure to one of Malaysia's most well managed property firms," he said.

He declined to be identified as he was not authorised to speak to the media.

IOI Properties, taken private in 2009 in a deal that then valued the company at RM1.3 billion, is viewed as having a rosy long-term outlook as Malaysia's economy continues to grow, and as the company diversifies further into Singapore and China.

Lee has installed one son, Yeow Seng, as chief executive of IOI Properties while another, Datuk Lee Yeow Chor, will head IOI Corp.

IOI Properties saw its property sales double in the last business year to RM1.7 billion, and aims to boost revenue to RM2.5-RM3 billion in the year ending June, 2015.

It sits on land available for development of some 4,000 hectares in Malaysia, Singapore and China, with a total estimated gross development value of more than RM20 billion.

In the short-term, Malaysia's real estate sector is expected to be hit by a planned hike in the real property gains tax and by new regulations doubling the minimum price at which foreign investors can buy houses.

Analysts say that IOI Properties will, however, be less affected by the cooling measures than rivals as it sells mainly to the mass market rather than high-end buyers and speculators.

AMMB Holdings Bhd, RHB Capital Bhd and Standard Chartered Plc were the joint global coordinators for the deal.-- Reuters