Is dual listings in M'sia and S'pore worth the effort?

ARE dual listings in Malaysia and Singapore a new trend for Malaysian companies and is the exercise worth the effort? In recent times, companies like Malaysia Smelting Corp Bhd (MSC), Guan Chong Bhd, Berjaya Sports Toto Bhd and IHH Healthcare Bhd have announced plans towards this end.

Of these, only MSC had succeeded in having a secondary listing in Singapore, the rest are at various stages of having a presence on the Singapore bourse.

Some analysts say that a dual or secondary listing in Singapore is an option for listed companies in Malaysia that desire better valuation, higher trading liquidity and more interest from foreign funds for their stock.

Inter-Pacific Research head Pong Teng Siew is not discounting the possibility of more Malaysian listed entities following in the footsteps of these companies.

“Capital markets are increasingly globalised, and the investor base in Singapore is bigger. Singapore is a regional financial centre, with a lot of funds parked for regional investments - more so than in Malaysia. So, these funds are better able to track stocks listed in Singapore,” said Pong.

Alliance Research head Bernard Ching agrees. “Yes, being listed in Singapore does open doors to more foreign fund managers,” he said.

TA Securities Holdings research head Kaladher Govindan said other reasons for a secondary listing in Singapore was obtaining a better valuation for the company's stock, in addition to raising funds.

MSC, the world's third largest integrated tin producer, had made a secondary listing at an offer price of S$1.75 on the Singapore Exchange (SGX) main board in January 2011.

MSC's exercise, which raised S$40.1mil via the sale of 25 million shares, was known as the first secondary listing of a Malaysian stock on the SGX.

In January 2011, MSC group chief executive officer Datuk Seri Dr Mohd Ajib Anuar had told StarBiz that by having dual-listing status, MSC shares would become more attractive to foreign investors and MSC would have access to capital markets in Singapore.

“The dual listing will also increase the public float of MSC shares, which is less than 25% currently, to about 40% after the dual listing, thus potentially improving the liquidity in the trading of MSC shares,” he had said back then.

Another potential dual listing may result from an exercise by Berjaya Sports Toto Bhd (BToto) which recently proposed to transfer its 100% equity interest in Sports Toto Malaysia Sdn Bhd to a business trust in Singapore.

Freddie Pang Hock Cheng, who is executive director of Berjaya Group and BToto, told StarBiz last month that the plan was for the trust to have a secondary listing on Bursa Malaysia following its planned listing in Singapore.

Meanwhile, Guan Chong, which is one of the largest cocoa processors in the region, had in April announced plans for a secondary listing on the SGX to facilitate access to the island nation's capital market, expand and diversify its shareholder base, and to enhance its profile in the international market.

Guan Chong's preliminary prospectus was lodged with the Monetary Authority of Singapore on June 28, and the company is presently undertaking investor roadshows in Singapore and Hong Kong.

Guan Chong managing director and chief executive officer Brandon Tay Hoe Lian had stated: “We aim for the dual-listing to facilitate our access to the capital market in Singapore, giving us the flexibility to tap into additional sources of equity funding for our expansion.”

“Aside from improving our market liquidity, the proposed secondary listing will enable the group to expand and diversify Guan Chong's shareholder base and improve our market visibility, specifically to the retail and institutional investors in the region,” Tay said.

HwangDBS Vickers Research said Guan Chong's secondary listing may enable the company to narrow its valuation gap with Singapore-listed peer Petra Food.

IHH Healthcare Bhd, Asia's biggest hospital operator, is en route to a dual listing in Malaysia and Singapore on July 25.

It is the first concurrent initial public offering (IPO) on these two markets.

The shares would be fully fungible, as IHH Healthcare shareholders would be able to transfer their shares from Bursa Malaysia to trade on the SGX and vice versa.

Pong reckons investors may benefit from arbitrage opportunities, by exploiting the price differences of units in Malaysia and Singapore.

“There may be short term window of opportunities. In the case of IHH Healthcare, the shares would be fully fungible,” he said.

Ching said he would not be surprised if the number of Malaysian companies with dual listings in Malaysia and Singapore continue to increase.

“Malaysian companies are increasingly going regional. Seeking a secondary listing in Singapore is among the ways of expanding their footprint. Look at AirAsia Bhd (which listed its Thai associate in Thailand in May),” said Ching.

AirAsia's new regional office is in Jakarta, and the budget airline also has plans to list its Indonesian associate this year.

Other factors for a secondary listing in Singapore is also to improve valuation and trading liquidity for the company's stock.

“It could be that the stock is under-appreciated in the local market - which tends to be GLC (government-linked company) focused.

“There is also the pull factor where the company's shareholder base has strong Singapore ties. Or the company may have operations in Singapore,” said Pong.

He noted that MSC was majority-owned by The Straits Trading Co Ltd, which in turn is listed on SGX while for IHH Healthcare, Singapore is a home market.

According to its website, IHH Healthcare has three hospitals and over 60 medical centres and clinics in Singapore.

Pong noted that having a dual listing was not something new for Malaysian companies, and cited Tanjong PLC as an example.

Tanjong was previously listed on both Bursa Malaysia and the London Stock Exchange.

“There are benefits. Companies with dual listing can get bigger interest from regional fund managers, an expanded investor base, better pricing and higher stock liquidity for shareholders,” he said, pointing out that the Malaysian market was not seen as highly liquid, and that this was “something that Bursa Malaysia may want to address.”

His view was borne out by Pemandu's (Performance Management and Delivery Unit) handbook on the Economic Transformation Programme (ETP), where it was noted that challenges faced by Malaysia's financial services sector include the lack of liquidity and diversity in the capital markets.

It noted that from their heyday before the 19971998 Asian financial crisis, Malaysia's capital markets have lost some of their vibrancy. “Bursa Malaysia's liquidity has diminished, with its liquidity ranking in Asia dropping from 3rd in 1996 to 14th in 2010,” it said.

Pemandu's ETP handbook also pointed out that Malaysia did not have to look far beyond its shores to find established financial centres that enjoy greater scale, visibility and liquidity, such as Singapore and Hong Kong.

It noted that while Malaysia continued to face negative perception issues stemming from the capital control measures implemented during the Asian financial crisis, these financial centres have developed their reputations as being open and pro-business.