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

KUALA LUMPUR, Sept 11 | Wed Sep 11, 2013 4:24am EDT

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

Westports is using this strategy to push on with its IPO as flotations in neighbouring Indonesia and the Philippines have either been downsized or delayed due to global market volatility and pricey valuations.

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

They said two other domestic and foreign funds made up the rest of the cornerstones for the IPO, which is the second largest in Malaysia so far this year after a planned $725 million) 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 counts state investor Khazanah Nasional and Hong Kong's Hutchison Port Holdings as shareholders, could not be reached for comment.

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

In other words, the bankers would only have to aggressively market just $90 million worth of shares, one of the sources said.

The Westports IPO comprises 813 million shares, with 710 million for institutional investors and the remainder for retail investors. The cornerstone investors account for close to 45 percent of the total institutional tranche with the rest allocated to business entities or individuals under an affirmative action policy for the majority ethnic Malays, the sources said.

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Local institutional funds have boosted the outlook for market debutantes, including a $3.2 billion listing of Felda Global Venture Holdings Bhd that made Malaysia the biggest IPO market in the Asia-Pacific excluding Japan last year.

This year's largest IPO from UMW Oil & Gas is taking a similar route. Up to 17 cornerstone investors have been recruited UMW Oil & Gas, taking up 61 percent of the total institutional tranche, sources said, nearly double that of Felda Global.

UMW Oil & Gas, the oil-field services arm of state-backed conglomerate UMW Holdings Bhd, could not be reached for comment.

Although cornerstones' involvement could help attract other institutional and retail investors, the lock up period by these investors could dampen liquidity and make it more expensive for others 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 easily find a market where there are these domestic funds readily available to support these IPOs, you have to pay a premium for this," he said. (Editing by Niluksi Koswanage and Jeremy Laurence)

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