10 Largest Malaysian IPOs

Below is a list of the ten largest IPOs in the last ten years on Bursa Malaysia.


                              == Market Cap ==
Company          IPO date      IPO       Now     Change
Petronas Chem   26/11/2010    42,480    53,600     26%
Maxis           19/11/2009    40,650    44,836     10%
IHH             25/07/2012    24,891    54,855    120%
Felda           28/06/2012    19,335     5,363    -72%
Astro           19/10/2012    15,592    15,199     -3%
Bumi Armada     21/07/2011    12,124     4,165    -66%
Westports       18/10/2013     9,037    14,356     59%
Malakoff        15/05/2015     9,000     8,400     -7%
UMW O&G         01/11/2013     6,702     2,000    -70%
AirAsia X       10/07/2013     2,963     1,452    -51%


Some comments:

• 6 out of 10 companies are still below their IPO price, that is not impressive at all
• if one would put the same amount of money in each stock, then one would have a loss of 5%
• on average the companies IPO-ed about 3.5 years ago
• for international investors, the RM is down by about 20% versus the USD since 3.5 years ago, so the results are much worse
• the market cap off all 10 companies together has risen though, since their combined IPOs
• it is mostly IHH saving the day, with EPF continuing to buy IHH shares aggressively even at a rich PE of around 60
• Maxis, Astro, Bumi Armada and Malakoff are all "listed-delisted-relisted" cases, Bursa should really take decisive action to discourage this kind of financial engineering which comes at the expense of the minority shareholders, it is long overdue
• quite a few resource related companies on the list, they have not fared well lately

There was once a time when companies were listed at single digit PEs supported by profit guarantees, the valuation was set by the authorities. Needless to say, there was a lot of interest by investors, and some IPOs were oversubscribed by 100 times.

Those days are over, companies nowadays set their own price, which is of course correct. New, "sexy" terms were introduced by financial engineers, like "cornerstone investors", "greenshoe options" and "stabilising manager".

But from the above data, it seems the IPO price is often quite rich these days, and not much upside (if any) is provided in exchange for the risk that IPO investors take.

Combined with my previous posting about poor earnings growth for the Top 30 companies (not surprisingly there is quite some overlap), things don't look that impressive.

Bursa can hold as many international roadshows as they want, but at the end of the day, it is the fundamentals and valuations that count. And they really have to improve.

IHH: profit up 60% or profit down 60%? (2)

I did a quick check how the quarterly results of IHH were reported by the press.

The good:

• Reuters
• The Motley Fool
• The Edge Malaysia
• The Sun daily
• KiniBiz
• Straits Times (Singapore)
• Business Times (Singapore)

The bad:

• The Star
• The Malaysian Insider

In both these cases even the heading was simply plain wrong.


The Market:

Both in Malaysia and Singapore the IHH share was today down more than 5%, much worse than the overall market. In other words, investors sentiment was clearly negative, not in line with IHH's positive press release.


Although profit of a one-off sale last year is a reasonable argument for the fact that the PAT was much lower, what IHH did not mention in its press release was that it raised billions during the IPO (July 2012), which it could freely allocate and over which it was supposed to make a good return.

In its defence the company could bring forward that no company is mentioning that, which is basically true, although disappointing.

The half year net profit was RM 347m, on Equity of RM 19.7 Billion and Liabilities of RM 7.1 Billion that is actually a pretty disappointing result. Return on equity on a full year basis would only be about 3.5%.

The more surprising that the share is trading at such a high valuation, on a first half EPS of only RM 0.04, on a share price of RM 3.84, annualised that means a sky-high PE of about 48.

IHH: profit up 60% or profit down 60%?

From The Star website:

"IHH Healthcare net profit up 60% to RM188.7m in Q2"

IHH Healthcare Bhd's net profit rose 60% to RM188.70mil in the second quarter ended June 30, 2013, excluding exceptional items and recognition of the sale of medical suites.

The company said on Tuesday the higher profit was due to the rise in earnings before interest, tax, depreciation and amortisation (EBITDA), savings in finance costs from repayment of short-term loans, and a one-off RM22.0mil tax credit this quarter relating to tax from a previous year.

IHH's revenue, excluding recognition of the sale of medical suites, grew by 14% on-year to RM1.68bil from RM1.48bil.  Earnings before interest, taxes, depreciation, amortisation, exchange differences & other non-operational items rose 20% on-year to RM419.6mil from RM349.2mil.

"The group's robust earnings were buoyed by the ramp up of new hospitals this quarter. Its newest facility in Singapore, Mount Elizabeth Novena Hospital, turned EBITDA positive for this quarter," it pointed out.

IHH Healthcare said Acibadem recorded healthy earnings and improved EBITDA from its two new hospitals - Acibadem Ankara and Acibadem Bodrum - despite a seasonal dip in inpatient admissions volumes this quarter compared to a year ago.

As for Acibadem Ankara, which opened in November 2012, turned EBITDA positive for this quarter while Acibadem Bodrum continued reducing its EBITDA losses.

The hospital group said in the six months ended June 30, 2013, excluding the recognition of the sale of medical suites, the group achieved 21% increase for both revenue and EBITDA from a year ago.

The strong performance was driven by organic growth of existing operations, ramping up of new hospitals as well as the full six months consolidation of Acibadem Holding's performance in H1, 2013 as compared to only five months consolidation in H1 2012 when the Group acquired Acibadem Holding on 24 January 2012.

The group's year-to-date 2013 PATMI excluding exceptional items and the recognition of sale of medical suites increased 39% to RM322.1mil, compared to the same period a year ago.


Shareholders of IHH who read the above surely must be very happy with their investment.

But when we look at the official announcement at the Bursa Malaysia website, we see something very different:

Earnings are hugely down, by about 60% compared to the same quarter a year ago!

Where does the difference come from? The official announcement uses the correct PBT and PAT based on time tested accounting principles, while the company's press release uses EBITDA (corrected for certain one-off items), which are simply nothing else then "Bull Shit Earnings" according to Charlie Munger.

The press release of IHH (to be found at the Bursa Malaysia website) is really disturbing in the sense that it does not mention at all the real profit numbers (PBT and PAT) in the main text (they can only be found in appendix 1 at page 4, where also EBITDA is mentioned in the same table) . 

I have no problem that the company tries to give a positive spin to the story (that is quite normal), but the correct basic numbers should be presented in a clear and transparent way, even if they look bad.

And for The Star, they should analyse press releases before they publish them, and put critical remarks alongside them. Nobody is helped by this kind of non-information, which I think is borderline misleading. Even the title is plain wrong, net profit is PAT, there is no way around it.

A much better article can be found on the website of The Sun:

"IHH Healthcare Bhd, the second largest healthcare group in the world in terms of market value, reported a net profit of RM156.76 million, or 1.93 sen a share in the second quarter ended June 30, 2013 (Q2).

The net profit was much lower compared with RM398.9 million made a year earlier".