Equities
IHH launches IPO in two South-East Asian cities
South-East Asia’s first simultaneous two-city listing is emerging as a Malaysian-dominated affair. IHH Healthcare last week covered the books for its M$6.4bn (US$2bn) dual listing in Malaysia and Singapore within the first day of bookbuilding, but early orders are heavily skewed towards the Malaysian leg.
All 22 cornerstone investors have chosen to participate in the Malaysian tranche, which is expected to be more liquid.
Cornerstones in Malaysian IPOs are normally subject to lock-up periods, while those in Singapore are not. The IHH offering is somewhere in between: a cornerstone investor is free to trade the first 50m shares it holds, but is locked up for six months beyond that level.
Investors seem to have no qualms with the structure of the offering. Disclosures have also been synchronised in Singapore and Malaysia. Investors can choose the tranche to buy into and will receive shares denominated in that currency. The shares are fungible and can be exchanged for those on the other exchange, in a process that takes one business day.
While the strong showing reinforces Malaysia’s reputation as a resilient base of domestic liquidity, the IPO has also attracted better-than-usual international demand, including several foreign cornerstones.
A source close to the deal acknowledged that while more foreign funds were turning their attention to Malaysia, the increased interest in this IPO was due largely to the appeal of the healthcare sector.
The only downside in the process is an element of currency risk. Between setting the IPO price on July 12 and listing on July 25, investors are exposed to any changes in the ringgit/Singapore dollar exchange rate, although historically this has not been very volatile.
More deals unlikely
As the first IPO to cover both locations, there was no regulatory framework in place prior to the deal, with regulators giving the lead banks freedom to help to build it. Spokespeople for Bursa Malaysia and the Malaysian Securities Commission last month said it was better to ask CIMB, one of the joint lead co-ordinators, how a dual IPO would work.
While the deal has established a template, few companies are likely to share the circumstances that made this structure necessary and feasible.
IHH was formed from the combination of several companies, including Singapore-listed Parkway Holdings and Pantai Holdings, which had a Bursa Malaysia listing, so investors in both countries are already familiar with the business.
“The strong showing reinforces Malaysia’s reputation as a resilient base of domestic liquidity”
Singapore is acknowledged to be a more suitable bourse for the healthcare sector, with more comparable stocks, but Malaysia is currently the active IPO market.
The price range is M$2.67–M$2.85, which works out to post-money P/E multiples of 41.0–43.7 times for 2012 and 35.9–38.3 times for 2013. However, a more relevant reference is the EV/Ebitda ratio of 15.2–15.9 for 2013.
The offering comprises 2.235bn shares plus a greenshoe of 169.4m shares.
Bank of America Merrill Lynch, CIMB and Deutsche Bank are joint lead co-ordinators, while Credit Suisse, DBS and Goldman Sachs are joint bookrunners for the global institutional tranche and cornerstone offering. CIMB and Maybank are joint bookrunners for the Malaysian Bumiputera tranche and joint underwriters for the Malaysia IPO. Nomura, OCBC, RHB and UBS are co-lead managers. The underwriting fee is 1.6%.