KUALA LUMPUR, Oct 19: Pay-TV firm Astro Malaysia Holdings Bhd made a modest market debut on Friday, underperforming other recent big listings in Kuala Lumpur’s booming IPO market due to concerns that its valuation was too expensive.
Astro’s $1.5 billion sale marked the last major listing this year in Malaysia, which became the top IPO market in the Asia-Pacific excluding Japan in 2012. Offerings are expected to cool off next year as deals run their course.
Shares in Astro were at 3.09 ringgit as of 0415 GMT, up 3 percent from the 3.00 ringgit price, in Malaysia’s third-biggest IPO this year. That was less than a rise of at least 6 percent that some analysts had expected for its debut session.
‘The share price is slightly below expectations, but it’s understandable because there were a lot of concerns earlier that the IPO was priced at a hefty price tag, in terms of price-to-earnings ratio,’ said Kaladher Govidan, head of research at TA Securities.
The IPO by Astro, controlled by Malaysia’s second-richest man Ananda Krishnan, followed Felda Global Ventures Holdings Bhd’s $3.3 billion offering in June and IHH Healthcare Bhd’s $2.1 billion flotation in July.
The flurry of deals has pushed Malaysia’s 2012 IPO tally to about $7.5 billion, accounting for nearly one-quarter of all new listings in the Asia-Pacific excluding Japan this year.
Four analysts in a Reuters survey had expected Astro to gain between 6 and 10 percent in its debut on Friday. By comparison, Felda, a palm oil firm, closed 16.5 percent higher on its first trading day. Hospital operator IHH had gained 10.5 percent on its debut.
‘We are quite happy with the price although it hasn’t gone up too high,’ Astro Chairman Tun Zaki Tun Azmi told reporters on Friday. ‘The other way to look at it is, if it goes up too fast, retailers are bound to dump. We’d rather have long-term investors than quick profit investors.’
‘UPSIDE POTENTIAL’
Astro, which also counts state investor Khazanah Nasional Bhd as a major shareholder, is returning to public markets after it was taken private in 2010.
At the offer price of 3.00 ringgit per share, Astro would have a market value of 15.6 billion ringgit ($5.1 billion), nearly double the 8.3 billion ringgit it was worth when it was taken private.
The offer price would translate to a price-to-earnings ratio of 32 times based on estimated earnings per share in fiscal 2013, TA Securities said.
Astro has a near-monopoly in Malaysia’s residential pay-TV market with a subscriber base of 3.1 million, which some analysts said would support the share price in the longer term.
‘While its IPO valuation may not appear cheap initially, there is upside potential given the existing low pay-TV penetration of 46 percent,’ Kong Heng Siong and Chan Jit Hoong, analysts at OSK Research in Kuala Lumpur, wrote in a recent report.
Astro will also likely see an increase in average revenue per user as subscribers migrate to high definition TV platforms, while high entry barriers to the industry due to capital expenditure requirements would limit competition, they added.
In its IPO, Astro sold shares at the top end of a marketing range, bolstered by strong demand from cornerstone investors such as U.S. Hedge fund Och-Ziff Capital Management and Standard Pacific Capital. The institutional portion of the IPO, or 20.8 percent of the total, was more than 30 times oversubscribed, the company said.
IPO BOOM
Malaysia has defied market gloom elsewhere that led several IPOs to be pulled, with several government privatisations and robust economic growth stoking interest from a captive domestic investor base and global fund managers.
The country’s IPO tally in 2012 has more than quadrupled from about $1.8 billion a year earlier, and compares with Hong Kong’s $1.83 billion and Singapore’s $3.97 billion so far this year, Thomson Reuters data shows.
But the market is expected to cool after such a robust 2012 and with no big IPOs on the horizon until the first quarter of next year.
‘For Malaysia, we will see some setback because all the bigger ones have been listed this year,’ said Kaladher of TA Securities. ‘And most of them are somehow government-linked companies. So you don’t have bigger private entities getting listed. It may run out of steam in the second half of next year.’
The next major listing will be the planned $1 billion offering for independent power producer Malakoff, 51 percent-owned by MMC Corp Bhd, in the first quarter of next year.
Westports Malaysia Sdn Bhd, operator of the country’s busiest port, is looking to raise as much as $500 million in an IPO in the second quarter of 2013. The founders of Malaysia’s AirAsia Bhd, Tony Fernandes and Kamarudin Meranun, are also set to kick off an IPO spree in 2013 with three listings worth more than $500 million.
Astro’s IPO was being handled by CIMB Group Holdings Bhd , Malayan Banking Bhd and RHB Capital Bhd . Several foreign banks were also advisers, including UBS AG, Credit Suisse Group AG, Goldman Sachs Group Inc and JPMorgan Chase & Co. (agencies)
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