New Listing/Update 7-Eleven rises 11% on debut as retail investors chase the stock

by **Cals** Fri 30 May 2014, 20:01

New Listing/Update 7-Eleven rises 11% on debut as retail investors chase the stock

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Friday, 30 May 2014 17:47
KUALA LUMPUR (May 30): 7-Eleven Malaysia Holdings Bhd (SEM), which gained 5% at the start of its maiden trades on the local bourse today, ended up with 11% gains in active trades.
7-Eleven, whose shares were priced at 1.38 ringgit each in its IPO, was chased by retail investors today after raising RM732 million in the initial public offering (IPO) to fund store expansion.
At 5.00 pm market close, the company’s share rose 15 sen or 10.9% to end at RM1.53 after trading at a high of RM1.55 earlier in the day.
On its maiden trading day, the stock attracted trades of some 202 million shares to rank the most active counter.
Controlled by Malaysian tycoon Vincent Tan, 7-Eleven holds 82% of market share of the standalone convenience store segment as of March 2014.
7-Eleven said its IPO is the largest IPO in Malaysia this year and the third largest international IPO in South East Asia thus far in 2014.
Commenting on the company’s opening price, non-executive chairperson Shalet Marian, said at a press conference following the company’s listing ceremony said: “We’re extremely pleased that our price opened at a premium. We’re also pleased to note that the market sees the potential in our company and the strong fundamentals that we have.”
When asked whether the company had a preliminary target price for the stock, Lena Tan, non executive managing director, said the company had left it to the market to decide the value of 7-Eleven.
“Our investors will decide where the (market) value of 7-Eleven is. We believe we have long term prospects in our company and will continue to roll out our expansion plans and it would be up to the market to determine what the price of 7-Eleven is,” said Tan.
On the valuation of the stock, Hong Leong Research views 7-Eleven's IPO price of RM1.38 per share as fair, as its estimated prospective price-to-earnings ratio (PER) of 20.8 times to December 2015 is in line with the regional peer average PER of 20.3 times.
Lena Tan had also responded to questions about dividend policies, saying: “We have a started a dividend payout ratio of 30%-50% of our profits.”
On whether SEM is prepared to deal with competition from other home grown convenience stores, Deputy CEO of 7-Eleven Gary Brown Thomas said he was confident of the company’s market ability to perform due to its scale.
“We’re confident in our ability. 7-Eleven will continue to perform as the market leader in the store market,” he said.
The company also expressed readiness for the implementation of the Goods and Services Tax (GST).
Managing Director Ho Meng said that the company would be spending RM66.3 million to upgrade its IT infrastructure to prepare for GST implementation.
“In total, we will be spending RM66.3 million over a three year period. The bulk of which would be spent before the implementation of GST on April 1, 2015.”