Malaysia

Malaysia’s business trust plan could see more mega IPOs

November 09, 2012

KUALA LUMPUR, Nov 9 — The introduction of a business trust framework by the end of the year could help extend Malaysia’s streak of billion-dollar IPOs of businesses from highways to utilities, said JPMorgan Chase & Co in a Bloomberg report today.

Steve Clayton, JPMorgan Chase & Co’s senior country officer for Malaysia, said that the country had a surplus of large companies with assets suitable for business trusts — which are similar to real estate investment trusts (REITs) — such as highways, telecom, utilities and gaming firms.

Ranjit has said the framework for business trusts will be ready by year-end. — File picRanjit has said the framework for business trusts will be ready by year-end. — File pic“There’s a lot of interest in these business trusts at the moment,” Clayton was quoted as saying by Bloomberg. “It means that the momentum that we’ve seen in the last six months will continue into the new year.”

The Kuala Lumpur stock exchange generated buzz in the global financial press after it floated some of the biggest new listings in the region and the world this year — including Felda Global Ventures Holdings, (FGVH), IHH Healthcare Berhad and Astro Malaysia Berhad — although not all have performed as hoped for.

Astro is now trading about 12 per cent below its IPO price while FGVH is just a few sen above its IPO price.

The bright spot has been IHH Healthcare which is trading about 13 per cent above its IPO price.

Bloomberg noted that business trusts have had a mixed performance in Singapore and Hong Kong with Hutchison Port Holdings Trust, which raised US$5.5 billion (RM16.5 billion) in Southeast Asia’s biggest IPO in March last year, slumping 23 per cent since.

The first shipping trust, Pacific Shipping Trust, meanwhile was delisted in March but HKT Trust in Hong Kong however has gained 60 per cent so far this year.

Berjaya Sports Toto was reported in June to be planning to list Sports Toto Malaysia (STM) as a business trust in Singapore.

The STM business trust would pay out 100 per cent of its surplus operating cash as dividends.

In a bid to boost the attractiveness of Malaysia’s capital market and provide more options for companies and investors, a slew of incentives were announced by the prime minister in the 2013 budget for business trusts.

These include stamp duty exemptions on transfer of assets and real property gains tax exemptions.

While REITs pay out at least 90 per cent of their profits as dividends to avoid paying taxes, business trusts are taxed at the corporate rate.

Eugene Wong, executive director of corporate finance and investments at Malaysia’s Securities Commission, told Bloomberg that the introduction of business trusts would help keep Malaysia’s capital markets current.

Securities Commission chairman Datuk Ranjit Ajit Singh told reporters last month that the framework for business trusts will be ready by year-end.