Affinity-backed Leong Hup International Debuts On Bursa Malaysia

Malaysia-based integrated poultry producer Leong Hup International Bhd made its trading debut on Bursa Malaysia Thursday morning, opening two sen above its IPO price of 1.10 ringgit.

Its shares rose as much as 8.2 per cent to 1.19 ringgit in the first few minutes of trading, giving Leong Hup a market capitalisation of 4.02 billion ($962.6 million). It seeks to raise a total of 1.2 billion ringgit ($288 million) from the listing including an overallotment option.

At closing time, Leong Hup’s share price closed flat 1.10 ringgit. Its intra-day high was 1.19 ringgit while it dipped to 1.09 ringgit briefly.

Leong Hup is backed by Hong Kong-based private equity firm Affinity Equity Partners, which picked up a minority stake in the poultry producer in 2014. The PE firm offloaded 421 million shares in Leong Hup prior to the IPO and still holds a 9.89 per cent stake.

The IPO had secured 10 cornerstone investors, including Malaysian pension fund Employees Provident Fund (EPF), AIA Bhd, Louis Dreyfus Company Asia Pte Ltd, Ovata Capital Management Limited, RHB Asset Management Sdn Bhd, Factorial Master Fund, Hong Leong Capital Bhd and Guoline (Singapore) Pte Ltd.

A majority of the gross proceeds raised will be utilised for Leong Hup’s capital expenditure to facilitate the expansion of operations in Malaysia, Vietnam and the Philippines.

“Notwithstanding approximately 71 per cent of our group’s revenue from sales of goods is derived outside of Malaysia for FYE (fiscal year-end) December 31, 2017, we have chosen to list our company in Malaysia and the overwhelming demand for our IPO clearly validates our decision,” said Leong Hup executive director and group CEO Francis Lau.

Speaking to reporters after the Bursa Malaysia debut, Lau said the poultry producer may also look at setting up operations in Cambodia.

Meanwhile, Leong Hup’s chief financial officer Chew Eng Loke said the partnership with Affinity Equity Partners has been “very good”.

Established in 1978 and originally from the southern state of Muar, Johor, Leong Hup is controlled by the Lau family and was delisted in April 2012 following a privatisation exercise. It is now the largest fully integrated producer of poultry, eggs and livestock feed in Southeast Asia.

The company had initially targeted to raise $600 million from the IPO but slashed the offering size last month as investor demand softened in a volatile market. Nevertheless, it is still the biggest IPO that the Malaysian bourse has seen since Lotte Chemical Titan Holding Bhd’s listing in July 2017.

Leong Hup controls two listed companies – egg producer Teo Seng Capital Bhd and Indonesian integrated poultry player PT Malindo Feedmil Tbk.

Due to the ongoing market volatility, local fast food operator QSR Brands (M) Holdings Bhd had to recently postpone its IPO following discussions with its bankers. It was seeking to raise about 2 billion ringgit ($500 million) and provide an exit to global private equity firm CVC Capital Partners and EPF, both of which hold a 24 per cent stake each in QSR.

Local home improvement retailer Mr.D.I.Y., which is backed by private equity firm Creador, is also eyeing a Bursa Malaysia listing sometime this November. The IPO could raise as much as 1.5 billion ringgit ($360 million).

Another Malaysian company, Loob Holding, which owns the Tealive bubble tea brand, is also reportedly planning a Malaysian IPO and could raise as much as 300 million ringgit ($72 million). The company is targeting to list next year.