MALAYSIAN power companies, banks and mobile phone firms are expected to lead a charge to expand overseas as the country’s move to allow its currency to strengthen makes foreign acquisitions cheaper.
A stronger ringgit would cut costs for Malaysian companies that shied away from offshore investments as the US dollar weakened last year, cutting in half the value of the country’s outbound mergers and acquisitions to just under US$2bil.
“The biggest excuse for them to not go abroad has just been removed,” said Raymond Tang, chief of investment at CIMB-Principal Asset Management, with RM6.4bil in assets.
Malaysian companies spent US$1.98bil acquiring overseas assets last year, compared with US$3.95bil in 2003, data from research company Dealogic showed.
Some Malaysian bidders have been outgunned in recent offshore auctions, such as that for the US$1.75bil sale of most of power firm Intergen’s non-US assets.
Analysts said candidates for expansion included Tanjong Plc, which with about RM1.2bil in cash, is in advanced talks to buy two Egyptian power plants from Electricite de France.
Tanjong and YTL Corp Bhd both missed out on Intergen, which was sold by Royal Dutch/Shell Group and US construction firm Bechtel in April.
In 2002, the year YTL bought Wessex Water in Britain, Malaysian firms invested US$2.6bil abroad - more than six times as much as in 2001.
“It’s a cheaper entry level for companies looking for new assets regionally,” said Teng Chee Wai, investment chief at Hwang-DBS Investment Management.
A stronger ringgit would help other cash-rich firms like Genting Bhd, which has about RM5bil in cash and short-term investments, to fulfil their aim of buying more power assets, said investors.
“It’ll give Malaysian companies a lot more confidence in making a significant offshore investment,” said Philip Lee, chief executive of JP Morgan Chase & Co’s South-East Asian operations.
Last month, Genting paid US$71mil for stakes in four power plants owned by US natural gas producer El Paso Corp.
Malaysian banks have also been scouring the region for growth markets in anticipation of greater competition at home as lending margins thin and Malaysia opens its doors to more foreign banks from 2007.
Mobile phone firms are also bidding for growth markets around Asia as cellular penetration reaches saturation point at home. – Reuters