Malaysia's top IPOs lock in more cornerstones to shield from volatility-sources

Reuters

By Yantoultra Ngui

KUALA LUMPUR, Sept 11 (Reuters) - Westports Holdings Bhd,operator of Malaysia's busiest port, has recruited mostlystate-linked funds to take up 90 percent of an institutionaltranche, two sources said, as it looks to shield its $610million IPO from jittery regional markets.

Westports is using this strategy to push on with its IPO asflotations in neighbouring Indonesia and the Philippines haveeither been downsized or delayed due to global market volatilityand pricey valuations.

The sources with direct knowledge of the deal told ReutersMalaysia' largest pension fund the Employee Provident Fund,civil servants' pension fund, a pilgrim fund and a state-ownedfund management firm were among the eight cornerstones involvedin the IPO due in October.

They said two other domestic and foreign funds made up therest of the cornerstones for the IPO, which is the secondlargest in Malaysia so far this year after a planned $725million) initial share sale by UMW Oil & Gas Bhd.

The funds could not immediately comment on the issue.Westports, which manages the world's 13 busiest port and countsstate investor Khazanah Nasional and Hong Kong's Hutchison PortHoldings as shareholders, could not be reached for comment.

With a lock up period of six months, bankers running the IPOdo not have to fret too much on drawing in foreign investors whoare focusing more on recovering Western economies in the wake ofthe U.S. Fed's steps to slow monetary stimulus.

In other words, the bankers would only have to aggressivelymarket just $90 million worth of shares, one of the sourcessaid.

The Westports IPO comprises 813 million shares, with 710million for institutional investors and the remainder for retailinvestors. The cornerstone investors account for close to 45percent of the total institutional tranche with the restallocated to business entities or individuals under anaffirmative action policy for the majority ethnic Malays, thesources said.

MORE SUPPORT

Local institutional funds have boosted the outlook formarket debutantes, including a $3.2 billion listing of FeldaGlobal Venture Holdings Bhd that made Malaysia thebiggest IPO market in the Asia-Pacific excluding Japan lastyear.

This year's largest IPO from UMW Oil & Gas is taking asimilar route. Up to 17 cornerstone investors have beenrecruited UMW Oil & Gas, taking up 61 percent of the totalinstitutional tranche, sources said, nearly double that of FeldaGlobal.

UMW Oil & Gas, the oil-field services arm of state-backedconglomerate UMW Holdings Bhd, could not be reachedfor comment.

Although cornerstones' involvement could help attract otherinstitutional and retail investors, the lock up period by theseinvestors could dampen liquidity and make it more expensive forothers to trade in the shares, fund managers said.

"But you have to admit that Malaysia is a different breed,"said a fund manager who declined to be named. "You can't easilyfind a market where there are these domestic funds readilyavailable to support these IPOs, you have to pay a premium forthis," he said. (Editing by Niluksi Koswanage and Jeremy Laurence)

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