More quick exits unlikely

More quick exits unlikely

Newly-listed companies are not expected to follow Berjaya Retail Bhd's "quick" privatisation route, even though more than half of some 35 companies listed since last year are trading below their initial public offering (IPO) price.

"There are many companies trading below their IPO prices, but I don't think this is going to be a trend. There are many other factors to consider before taking a company private, not just how its share price perform," Mercury Securities head of research Edmund Tham said when contacted yesterday.

"When companies are listed, they get higher market and product visibility. They could also get easier access to financing and better financing terms," Tham added.

Since 2010, some 35 companies made their debut on either the Main Market or the ACE Market of Bursa Malaysia. Of this, 20 companies, or about 57 per cent, are below their IPO prices.

From the 35 IPOs, 28 are listed on the Main Market, while the balance seven are listed on the ACE Market. Five of the seven ACE Market IPOs are trading below their IPO prices.

Analysts pointed out that the underperformance was due to market sentiment and lack of exposure to investors, among others.

They also pointed out that the main reason these newly-listed companies embarked on the IPO exercise was to raise funds for expansion. Therefore, it is unlikely that they would seek more funds to privatise themselves only after a short stint on the bourse.

Last Friday, Premier Merchandise Sdn Bhd, in which tycoon Tan Sri Vincent Tan has an indirect 100 per cent stake, announced plans to buy the remaining shares it does not own in Berjaya Retail for 65 sen each. The move came less than seven months after its debut on the local stock exchange.

Premier Merchandise cited BRetail's undervalued share price as one of the key reasons for the privatisation plan.

The exercise would cost Tan, who has an indirect stake of 85 per cent in BRetail, about RM145 million.

Some analysts are not surprised by Tan's move but were somewhat disappointed by it.

"It is quite bad for minority shareholders who are looking for long-term investments," said an analyst from a local research house.

Although they ruled out the privatisation prospects of newly-listed firms, analysts are not dismissing such exercises being taken by some.

An analyst said that companies that could be in the privatisation radar must boast criteria such as cash-rich, business-savvy owner or major shareholder, under-performance of their share price, and price-to-earnings (PE) ratio that is significantly below industry peers.

One such company under the investors' radar is DRB-HICOM Bhd, whose privatisation talks have been widely speculated.

The group is currently trading at single-digit PE, as compared to its peers, which are trading as much as more than 30 times PE.

DRB-HICOM had said it is unaware of any privatisation plans.

Hwang-DBS Vickers has placed a target price of RM3.80 on the group.

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