Malakoff IPO ignites domestic investors

South East Asia's largest independent power producer set to price at top of range after institutional investors show no price sensitivity.

Formal roadshows for the M$3.06 billion ($841.7 million) to M$3.15 billion initial public offering by Malakoff Corporation Berhad were launched on Friday, with the institutional order book already four times covered by the end of the first day. 

Sources close to the deal say the flotation is likely to price at the top end of its M$1.75 to M$1.80 range given the strong support it has received, particularly from domestic institutions. Almost all of the orders are said to have come in at strike, indicating no price sensitivity.

The deal has been bolstered by the syndicate’s pre-marketing efforts, which ended with a majority of the paper being locked away with cornerstone investors, leaving only a small tranche for other domestic and foreign institutions. 

A group of 11 domestic cornerstone investors have taken up 553.76 million shares equating to 55.7% of the 729.24 million share institutional tranche and its greenshoe of 228.26 million shares. They comprise: CIMB Asset Management; Corston Smith Asset Management; Eastspring Investments; Great Eastern Life Assurance; Hong Leong Asset Management; Kencana Capital; Maybank Asset Management; Pilgrims Fund Board; RHB Asset Management; Social Security Organization and UOB Asset Management.

This means there are 403.74 million shares left to allocate to other institutions, equating to M$706.54 million to M$726.7 billion. About half of this amount is likely to go to domestic investors.

The deal’s remaining 792.5 million shares are all earmarked for domestic investors as well. Some 550 million shares are being sold to Bumiputera investors and 242.5 million shares to domestic retail investors and company employees according to a term sheet seen by FinanceAsia.

In total, the deal amounts to 30.4% of the company's enlarged share capital pre greenshoe, with a split of 65.7% primary shares and 34.3% secondary shares. 

The greenshoe comprises secondary shares.

If it is exercised, parent company MMC Corporation Berhad's stake will drop from 51% to 36.5%, with the Employees Provident Fund reduced from 30% to 17.4%, Kumpulan Wang Persaraan will be diluted from 10% to 5.8%, SCI Asia from 6.5% to 3.8% and SAESAF Power from 2.5% to 1.5%. 

Roadshows for the deal continue in Hong Kong on Monday and Tuesday, before moving to Singapore on Wednesday and Thursday, then on to London the following Monday. Pricing and allocations are scheduled for April 29, with listing on May 15.

The retail offering has already opened in Malaysia and will close on April 28.

Malaysian equities have been fairly range-bound over the past month, with the Kuala Lumpur Composite Index on a mild decline since Easter. Year-to-date, it is up 4.8%.

Foreign investors have been less active given the downward pressure on the Malaysian ringgit, which has hit their profits. The currency is down 8.8% since late July.

However, the slide has shown signs of stabilising over the past month, with renewed buying activity every time the currency drops below M$3.7 to the dollar.

Earlier this year, Prime Minister Najib Razak also tried to stop the slide by directing pension funds to invest all new inflows in the domestic stock market, up from 75% previously.

As one banker commented, “Malaysian IPO’s always tend to make people money because of their strong domestic support. Local companies generally only hit a wall when they try and list overseas.”


At M$1.80 per share, Malakoff’s IPO has been valued at 8.1 times 2015 syndicate consensus EV/Ebitda forecasts. This places it at a big discount to domestic gas companies such as Petronas Gas and Gas Malaysia, which trade in the mid to high-teens on a 2015 basis, but in line with other IPP’s including YTL Power and electricity distributor Tenaga, which trade around the eight to nine times.

Tenaga has dropped 1.6% over the past month. YTL Power has been a rising trend, up 1.9%.

The share price of Malakoff’s parent has risen 13.8% year-to-date, although it has been fairly range-bound since the beginning of April. Investors responded positively to news of the spin-off since almost all of the proceeds are being used to re-pay debt and will free up the balance sheet for new acquisitions.

As of September 2014, 89% of Malakoff’s power generation assets were in Malaysia, with 9% in the Middle East and 2% in Australia. At this point, electricity generation and distribution accounted for 96.5% of revenues, with the coal fired plants accounting for 35% of its fuel mix in Malaysia, gas 47% and mixed fuels the remaining 18%.

Joint global co-ordinators for its IPO are: CIMB, Credit Suisse, Maybank and JP Morgan. Joint bookrunners are: Bank of America Merrill Lynch, Deutsche Bank, HSBC, Morgan Stanley, Nomura and RHB.

¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media