PETALING JAYA: The recent flurry of privatisations of listed companies is causing concern among investors who are struggling to fathom the reasons for this trend.
July alone saw the announcement of five privatisations that have the potential to wipe out some RM15bil in market capitalisation from the stock market.
Market talk has it that a few more privatisations of relatively large capitalised listed companies are in the offing.
While many major shareholders taking their companies private rationalise their exercise on the basis of higher capital needs, questions have been raised as to whether the privatisations are driven by a seeming under-valuation of these assets by the market.
Some quarters say Bursa Malaysia Bhd should be doing something to address this “under-valuation” problem and thereby, stem the tide of de-listings.
Bursa chief executive Datuk Yusli Mohamed Yusoff noted that the stock exchange operator “is certainly not unique in this aspect (of privatisations) as this is also faced by other exchanges.”
“We have witnessed a few privatisations by companies which needed the flexibility to manage capital expenditure, therefore they have sought other sources of funding to fulfil their growth and expansion plans,” Yusli said in a written response to StarBiz.
“The market is also conducive for private equity players as they are cash-heavy, hence we can see the global mergers and acquisitions transactions increasing compared with last year,” he added.
He also said that “valuation is a relative term” but acknowledged that there were some challenges that had an impact on the market. “Perceptions and macro factors such as the lack of liquidity and free float have an impact on the market and we work closely with the government and regulatory authorities to address this.”
OSK Research head Chris Eng said that in terms of the long term prospects of the stock market, “this development (of privatisations) is a bit worrying.”
But he pointed out that not all the recently-announced privatisations would necessary end up in de-listings. “There are some, like Kretam Holdings Bhd, where the general offer is being made because the takeover threshold has been breached. Based on the offer price, you can deduce that there’s no serious intention to privatise,” he said.
He added that the number of initial public offerings (IPO) had increased and that some large listings may also be coming on-stream this year, which should to some extent, offset the effects of the privatisation.
This includes the planned IPO of Malaysian Marine and Heavy Engineering Holdings Bhd (MMHE) which is expected to be completed in the fourth quarter of this year.
Analysts said that the IPO could raise around RM1bil from the market, giving MMHE a market capitalisation of around RM7.5bil.
An analyst also said there was a strong likelihood that T. Ananda Krishnan could list some of his other companies on Bursa soon, in a sort of quid pro quo. Ananda’s recently announced privatisations of Tanjong plc and Measat Global Bhd, following the already privatised Astro All Asia Networks plc, make up the bulk of the recent flurry of companies going private.
“Don’t rule out the listings of Bumi Armada Bhd and Powertek Bhd,” the analyst said, adding that “he (Ananda) had brought back Maxis after taking it private, albeit minus the foreign assets.”
Ananda had privatised Powertek and Bumi Armada in 2003, in deals worth a combined RM800mil.
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