Tuesday April 12, 2011
Almost as many companies taken private as IPOs the past 6 months
By JEEVA ARULAMPALAM
PETALING JAYA: Although the number of initial public offerings on the local stock exchange doubled to 29 last year from 2009 and the first quarter of this year has seen nine companies list, there was also a sizeable number of companies being taken private.
In comparison, 13 companies have been listed on the Main Market of Bursa Malaysia since last October to April this year while over 10 Main Market companies received privatisation proposals in that same duration.
Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose said a reason for the slew of privatisation was because those stocks were trading at valuation discounts in comparison to regional peers.
He added that aside from companies being undervalued by the local market, another rational was that “we are on the cusp of a corporate spending cycle”, since the corporate sector has been largely cashed up.
“There are multiple reasons why companies are taken private. For instance, the owners of a company sees value in a company and will rather privatise it so that the profits can be kept for themselves. Also, some owners may want to list the company in other markets such as Hong Kong as they seek out better value,” said TA Securities Holdings Bhd head of research Kaladher Govindan.
He added that as with government initiatives undertaken to attract foreign direct investments into the country, there should be policies or incentives to make it more attractive to keep companies listed here, especially since their operations are based domestically.
A popular route used for such privatisation proposals by its major shareholders, notably in the last six months, was the takeover of assets and liabilities of the listed entities, including Sunway Holdings Bhd and Sunway City Bhd, PLUS Expressways Bhd, Emivest Bhd, Leong Hup Holdings Bhd and Asia Pacific Land Bhd.
For instance, Sunway Group chairman Tan Sri Jeffrey Cheah and his daughter proposed to take over the assets and liabilities of Sunway Holdings Bhd and Sunway City Bhd (listed on the Main Market) late last year through their own vehicle Sunway Sdn Bhd. After the privatisation of both these companies, the plan is to list Sunway Sdn Bhd sometime this year.
Other companies to have more recently received privatisation proposals include Berjaya Retail Bhd and Mamee-Double Decker (M) Bhd.
While the number of listings may be comparable to the quantum of companies being taken private, it must be noted that there were two significant listings Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and Petronas Chemicals Group Bhd by market capitalisation in the final quarter of last year. Both companies are Petronas-owned.
As at yesterday, MMHE and Petronas Chemicals had a market capitalisation of RM10.99bil and RM53.32bil respectively, while the latter is a member of the FTSE Bursa Malaysia KL Composite Index.
However, industry players note that companies being taken private equal less stock options for investors in the market and will not bode well for overall market sentiment.
Over the last nine years, the total market capitalisation of Bursa Malaysia had grown at a rate of 10% per annum, while stock markets in Indonesia and Singapore had grown at 24% and 17% respectively.
Malaysia's MSCI Asia excluding Japan weighting has shrunk to only 3.2% from 6% in 2000, causing international fund managers to disregard Bursa.
To add to this, Bursa's liquidity has lost its vibrancy, with its liquidity ranking in Asia dropping from third in 1996 to 14th this year. There is also limited diversity in the market, be it in terms of products or currency.
Invest Malaysia 2011, which starts today over a two day period, is expected to see the unveiling of several highly anticipated IPOs which include the listing of several units under Felda Global Ventures Holdings Sdn Bhd.
Almost as many companies taken private as IPOs the past 6 months
By JEEVA ARULAMPALAM
PETALING JAYA: Although the number of initial public offerings on the local stock exchange doubled to 29 last year from 2009 and the first quarter of this year has seen nine companies list, there was also a sizeable number of companies being taken private.
In comparison, 13 companies have been listed on the Main Market of Bursa Malaysia since last October to April this year while over 10 Main Market companies received privatisation proposals in that same duration.
Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose said a reason for the slew of privatisation was because those stocks were trading at valuation discounts in comparison to regional peers.
He added that aside from companies being undervalued by the local market, another rational was that “we are on the cusp of a corporate spending cycle”, since the corporate sector has been largely cashed up.
“There are multiple reasons why companies are taken private. For instance, the owners of a company sees value in a company and will rather privatise it so that the profits can be kept for themselves. Also, some owners may want to list the company in other markets such as Hong Kong as they seek out better value,” said TA Securities Holdings Bhd head of research Kaladher Govindan.
He added that as with government initiatives undertaken to attract foreign direct investments into the country, there should be policies or incentives to make it more attractive to keep companies listed here, especially since their operations are based domestically.
A popular route used for such privatisation proposals by its major shareholders, notably in the last six months, was the takeover of assets and liabilities of the listed entities, including Sunway Holdings Bhd and Sunway City Bhd, PLUS Expressways Bhd, Emivest Bhd, Leong Hup Holdings Bhd and Asia Pacific Land Bhd.
For instance, Sunway Group chairman Tan Sri Jeffrey Cheah and his daughter proposed to take over the assets and liabilities of Sunway Holdings Bhd and Sunway City Bhd (listed on the Main Market) late last year through their own vehicle Sunway Sdn Bhd. After the privatisation of both these companies, the plan is to list Sunway Sdn Bhd sometime this year.
Other companies to have more recently received privatisation proposals include Berjaya Retail Bhd and Mamee-Double Decker (M) Bhd.
While the number of listings may be comparable to the quantum of companies being taken private, it must be noted that there were two significant listings Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and Petronas Chemicals Group Bhd by market capitalisation in the final quarter of last year. Both companies are Petronas-owned.
As at yesterday, MMHE and Petronas Chemicals had a market capitalisation of RM10.99bil and RM53.32bil respectively, while the latter is a member of the FTSE Bursa Malaysia KL Composite Index.
However, industry players note that companies being taken private equal less stock options for investors in the market and will not bode well for overall market sentiment.
Over the last nine years, the total market capitalisation of Bursa Malaysia had grown at a rate of 10% per annum, while stock markets in Indonesia and Singapore had grown at 24% and 17% respectively.
Malaysia's MSCI Asia excluding Japan weighting has shrunk to only 3.2% from 6% in 2000, causing international fund managers to disregard Bursa.
To add to this, Bursa's liquidity has lost its vibrancy, with its liquidity ranking in Asia dropping from third in 1996 to 14th this year. There is also limited diversity in the market, be it in terms of products or currency.
Invest Malaysia 2011, which starts today over a two day period, is expected to see the unveiling of several highly anticipated IPOs which include the listing of several units under Felda Global Ventures Holdings Sdn Bhd.
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