Bintulu port to compete with PSA for IPO dollars

Bintulu Port Holdings IPO plans could divert attention from rival PSA.
Bintulu Port Holdings, which operates the Bintulu port in eastern Malaysia, plans to list its shares for the first time on the Kuala Lumpur Stock Exchange, a move analysts say may be as much about distracting attention from the planned listing of Singapore's PSA Corp. as about raising money for itself.

State-owned Bintulu plans to sell 100 million new shares at RM$2.00, while Minister of Finance Inc., the government holding company that owns Bintulu, plans to sell 136 million existing shares at the same price. If they succeed, the port could raise at least RM$472 million ($124 million). The company plans to offer 60% of the new shares to foreign investors, making it the first Malaysian company to do so since the 1997 currency crisis.

Bintulu aims to list its shares early next year, putting it on a collision course with PSA, which in October said it would postpone its own IPO – originally planned for the fourth quarter of this year - until it decides which property assets to include in the listed company. PSA is one of the busiest container terminals in the world, garnering business that Malaysia thinks should flow through its own ports.

"Ports are seen as a strategic asset for Malaysia, which wants its exporters and importers to use its own ports rather than Singapore's," says Russell Green, publisher and editor of Cargonews Asia. "The government has been putting a lot of pressure on shippers to do so."

Bintulu's IPO is far smaller than PSA's. PSA plans to raise as much as S$3.75 billion ($2.15 billion) in a listing aimed at adding momentum to the government's privatization program.

Still, the timing of Bintulu's announcement has raised suspicion the move is purposely aimed at diverting investors' attention away from PSA. Malaysia has scuppered attempts by companies such as Singapore Telecommunications to gain stakes in prominent government-controlled Malaysian companies.

"The timing suggests that the Malaysian principals are either hoping to capitalize on investor interest in ports generally or possibly distract investors from PSA's listing," says John Casey, an analyst at SG Securities in Singapore.

Bintulu, based in the state of Sarawak, plans to use any new funds to expand its container terminal. Not everyone agrees that its proposed listing is maliciously motivated, or that it represents the slightest threat to PSA.

"In terms of the amount of containers it handles each year, Bintulu is a mere pinprick compared to PSA," says Green. "Bintulu geographically will serve a different region. Its listing is part of the government's gradual opening up of the transportation sector."

Nonetheless, PSA is facing increased competition from its Asian rivals. The company recently lost a major customer when Maersk Sealand, part of A.P. Moller, the world's biggest shipping company, bought a 30% stake in the Malaysian port of PT Tanjung Pelepas which lies across the Singapore Straits. Maersk has started diverting business away from PSA to Tanjung Pelepas.

In September, Hutchison Port Holdings, the ports arm of Hong Kong-based conglomerate Hutchison Whampoa, said it would buy a 48% stake in Indonesia's state-owned Koja Terminal, its second investment in a Jakarta port in two years. Hutchison plans to spend $250 million to develop small ports throughout Indonesia, again potentially diverting business away from PSA.

Despite the rivalry, both Bintulu and PSA's listings could attract investors looking for a stable alternative to volatile tech stocks. Ports typically have a steady earnings stream and their growth reflects trade levels and the performance of the economy.

"If investors are a little shy of technology stocks but have a positive view on Asian economic recovery, then infrastructure plays may seem like a safe harbor," says Casey.

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