Response to Westports offering signals pent-up demand for Southeast Asian IPOs

Pricing of Malaysia's biggest port operator, one-third owned by Li Ka-shing, is at top of marketed range

PUBLISHED : Tuesday, 01 October, 2013, 2:57pm
UPDATED : Tuesday, 01 October, 2013, 2:58pm

Westports, the operator of Malaysia’s busiest port, priced its initial public offering at the top of its projected range to raise US$680 million, signalling a boost for Southeast Asia’s capital markets on pent-up demand for emerging market stocks.

Sources said foreign and domestic funds jostled to bid for Westports, which is partially owned by Asia’s richest man, Li Ka-Shing, taking advantage of the US Federal Reserve’s unexpected decision not to withdraw stimulus.

The result bodes well for an up to US$730 million IPO by UMW Oil & Gas in October, which is set to be Malaysia’s biggest listing of the year and could give other firms in Malaysia and Southeast Asia the confidence to push ahead with listing plans.

“Issuers in Southeast Asia are taking advantage of this new window as a result of the Fed’s surprise decision to not taper – free liquidity reigns and this has been a shot of adrenaline in the arm for emerging market risk appetite,” said James Fleming, co-head of Asia Pacific global capital markets at Bank of America Merrill Lynch in Hong Kong.

IPOs in Southeast Asia had been hit by the global market turmoil sparked by Fed chief Ben Bernanke’s comments in May that the US central bank planned to unwind its massive stimulus. Malaysian listings were also hurt by political uncertainty before general elections in May.

Westports’ book was more than 30 times oversubscribed and closed two days earlier than scheduled. Overseas demand was instrumental in pushing pricing to the top of the 2.30 Malaysian ringgit (HK$5.48) to 2.50 ringgit indicative range for institutional investors, the sources said.

Westports, which manages the world’s 12th most active port, overlooking the Malacca Straits, declined immediate comment.

IPOs that could get a boost include a US$220 million deal by Seven Convenience, which could happen in the coming months and a US$300 million flotation by property development firm Iskandar Waterfront early next year.

And next year could be a repeat of last year – when Malaysia was Asia’s top destination for listings – with state investor 1Malaysia Development planning a US$3 billion listing for its energy assets and independent power producer Malakoff looking at an up to US$1 billion IPO.

Beyond Malaysia, companies like the Philippines’ Travellers International Hotel Group are also reviving IPO plans, although the size of that offering has been cut by almost half to US$450 million as investors become more demanding on valuations, sources said.

The Philippines’ Robinsons Retail also plans to start premarketing for its US$500 million offering in the second week of October, although this IPO too was reduced in size, according to IFR, a Thomson Reuters publication.

“With a spectacular rise since 2010, valuations of companies in Southeast Asia are no longer cheap,” said David Poh, regional head of portfolio solutions, Societe Generale Private Banking, Asia Pacific.

“IPOs at the moment present an opportunity if the fundamentals of the company are sound and they are reasonably priced but may also be a high risk for investors as liquidity withdrawal may hurt.”

At 2.50 ringgit per share, Westports will have a market value of some 8.53 billion ringgit when it debuts on October 18. All proceeds from the offering will go to existing shareholders and not to the company, which has said it is listing to raise awareness of its brand.

Westports leaned heavily on cornerstone investors, ranging from Utilico Emerging Markets to Genesis Investment Management, which accounted for nearly half of the institutional tranche.

After the IPO, the collective holding of the Gnanalingam family, one of Malaysia’s wealthiest families, will fall to 46.8 per cent from 60 per cent. Ruben Emir Gnanalingam Abdullah is the firm’s chief executive.

The interest of Li, who owns shares in Westports through a subsidiary of Hutchison Whampoa, will drop to about 24 per cent from about a third.