Published: Tuesday July 3, 2012 MYT 12:36:00 PM
Malaysia to grab Asia IPO top spot with $2 bln IHH listing
KUALA LUMPUR: Malaysia launched on Tuesday the US$2 billion initial public offering of state-backed hospital operator IHH Healthcare Bhd, marking the third biggest listing of the year globally and cementing its status as Asia's top IPO destination for 2012.
The sale of shares in IHH follows the $3 billion listing on the Malaysian bourse last week of palm oil firm Felda Global Ventures Holding, which was the world's biggest IPO of the year after Facebook Inc.
The IHH IPO prospectus was launched at an event in Kuala Lumpur, continuing Prime Minister Datuk Seri Najib Tun Razak's drive to monetise state-linked assets and boost the economic feel-good factor ahead of a general election due by next March.
His brother, CIMB Group Chief Executive Datuk Seri Nazir Razak whose investment bank is the lead global co-ordinator of the listing, said, based on an indicative IPO price of 2.85 ringgit per share, IHH's market value of 22.9 billion ringgit ($7.24 billion) would place it second to HCA Holdings - the world's largest listed healthcare provider.
"Malaysia looks set to be Asia's top IPO market this year, a testament to both the quality of companies being listed and the resilience of the Malaysian equity market," Nazir told reporters.
IPOs in Malaysia, where the equity market is dominated by local investors and a large domestic pension fund system, have defied a trend in financial markets such as Singapore, where motor racing firm Formula One decided to postpone its near $3 billion flotation.
As a result, Kuala Lumpur has been running neck-and-neck with China's Shenzhen as Asia's top IPO destination.
Sovereign wealth fund the Kuwait Investment Authority, asset manager Blackrock and 20 other big "cornerstone" investors have committed to buy nearly two-thirds of the shares on offer.
But some investors warned Malaysia's top dog IPO status was unlikely to last long.
"Malaysia is now the largest IPO market in Asia and surely that is not sustainable," said Abdul Jalil Abdul Rasheed, chief executive officer of Aberdeen Islamic Asset Management Sdn in Kuala Lumpur.
"I think it's just that Malaysia is probably having some time in the sun now that other markets are quite weak."
IHH, the healthcare arm of Malaysia's state investor Khazanah Nasional, is one of the few available plays on the healthcare sector in the region, where rising incomes are stimulating demand for better services.
IHH, which counts Japan's Mitsui & Co and Dubai-based Albraaj Capital as shareholders along with Khazanah, embarked on an aggressive overseas shopping spree in recent years.
Khazanah Managing Director Tan Sri Azman Mokhtar said the listing would value its stake in IHH at 11 billion ringgit, an 83 percent jump from its equivalent investment cost of some 6 billion ringgit.
"The listing will help to underpin the various governments' sectoral and economic ambitions," said Azman in an earlier speech to investors at the launch.
"This includes healthcare as one of the key sectors in Malaysia, promotion of Singapore as a regional and global healthcare hub and Turkey and India as significant and vibrant domestic and medical tourism destinations."
IHH has made no mention of plans to use the IPO proceeds for further acquisitions. It said in its draft Singapore prospectus it would use 4.66 billion ringgit ($1.5 billion) to pay down debt, saving some 120 million ringgit ($37.8 million) in interest payments.
Total debt stood at around $2.4 billion as of the end of March.
BETTER THAN FELDA GLOBAL
A strong domestic market could see IHH make a stronger trading debut than Felda Global's 20 percent first day pop when the firm lists on July 25, due in part to its defensive appeal, local investors say.
"IHH offers less to the public and institutional investors (10.52 percent) than Felda (26.9 percent), how difficult is it for it to perform the same as Felda?" said a senior official with a Malaysian bank-backed fund management firm.
The institutional price and final retail price is expected to be fixed on July 12.
The 22 cornerstone investors, who also include International Finance Corp, the private investment arm of the World Bank, will buy 1.39 billion of the 2.23 billion shares on offer - just over a quarter of the company - the biggest take-up by such investors of any recent major offering in the region.
Up to 1.8 billion new shares in the IPO are on offer, while Abraaj Capital will sell 434.7 million shares in the dual Kuala Lumpur and Singapore listing, the draft prospectus showed.
The group posted a profit of 394.117 million ringgit in 2011 versus 574.754 million in 2010 - a drop of 31 percent on higher staff costs.