KLCCP launches landmark IPO

  • Business
  • Thursday, 22 Jul 2004

KLCC Property Holdings Bhd (KLCCP) launched its much-awaited initial public offering (IPO) yesterday, paving the way for the listing of a national landmark – the Petronas Twin Towers. The IPO itself is also a landmark for the capital market. 

“It is the largest property IPO in Malaysia's corporate history,” said Datuk Nazir Razak, the chief executive of Commerce International Merchant Bankers Bhd (CIMB). “It is also the largest IPO for 2004 to date.” 

CIMB is the lead manager, sole bookrunner and managing underwriter for KLCCP's listing exercise. 

KLCCP will issue 77.84 million new shares at RM1.68 each for public subscription, 15.57 million new shares for directors and employees at the same price, and 338.74 million new shares for institutional investors. 

As Nazir pointed out, there is a “refund mechanism” to provide for a discount of at least 7% in the retail price of the shares, compared with that for institutional investors. 

The institutional price will be determined through a book-building exercise in which investors will be invited to indicate the prices they are willing to pay for the shares. 

At the launch of KLCC Property's listing prospectus are: (from left) Tan Sri Mohd Hassan Marican, Datuk Ishak Imam Abas and KLCCP director Tunku Tan Sri Ahmad Tunku Yahaya.

The final retail price will be 93% of the institutional price. If the final retail price is lower than RM1.68 a share, the difference will be refunded to applicants from the general public. 

The discount from the institutional price is an attractive feature as it ensures that the public will be buying KLCCP shares at a lower cost than fund managers. 

Nazir expects KLCCP to have a market capitalisation of at least US$500mil (RM1.9bil) and a high free float of 49%. This will draw fund managers to the stock. 

The company has forecast an after-tax profit of RM135mil and earnings per share (EPS) of 17.9 sen for the financial year ending March 31, 2005. This translates into a price/earnings multiple of 9.4 times. 

At the same time, KLCCP has projected a gross dividend of 9.34 sen a share for fiscal 2005, or a gross dividend yield of 5.6%. 

Asked about concerns over KLCCP's debt-to-equity ratio, chief executive Datuk Ishak Imam Abas said the gearing was not a concern. 

“Of the total debt, a substantial portion is for the Twin Towers and that borrowing is completely matched by the income stream,” he said. The Twin Towers are leased on a long-term contract to Petroliam Nasional Bhd (Petronas). 

“The other debt is for Suria and Mandarin (Oriental Hotel) and again, they are expected to maintain their current income stream,” Ishak added. 

Nazir said KLCCP's gearing would be about 1.3 times after the IPO; the exact level would depend on the amount raised from the IPO. 

The gearing of the company generates efficiency in the use of capital. It is as a result of gearing that KLCCP paid only RM738.8mil for a 50.5% stake in the Twin Towers, which has an open market value of RM4.2bil. 

At the same time, the EPS would be less if there were no debt in the company, as it would have needed a larger capital and number of shares. 

KLCCP's property assets consist of 100% of Dayabumi, Menara ExxonMobil and two parcels of development land in KLCC, 50.5% of the Twin Towers, 60% of Suria, 75% of Mandarin Oriental and 33% of Menara Maxis. 

Ishak said the company would develop an extension of the Suria shopping complex on one of its two parcels of land. “We've asked architects to submit proposals,” he said. 

The extension will have retail space, offices and serviced apartment. “We're in the process of identifying a partner,” Ishak said. The partner will be the primary tenant of the property. 

On a question as to whether all the other properties of Petronas would eventually be acquired by KLCCP, Petronas president Tan Sri Mohd Hassan Marican said the group “takes things one step at a time”. KLCCP was formed to consolidate Petronas' property assets, he added. 

Petronas owns a number of other parcels of development land in KLCC and Kuala Lumpur and government office buildings in Putrajaya. 

It is understood that KLCCP officials left last night, after the launch of the prospectus, for a roadshow to Singapore, Hong Kong and London. 

Related Stories:KLCCP gets quality earnings KLCC Properties CEO shares thoughts on KLCCP KLCC delivers style and energy 

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