PETALING JAYA: The country’s largest poultry player Leong Hup International Bhd, which is set to make a comeback to Bursa Malaysia, has been valued at 15 times price-to-earnings (PE), according to a news report.
According to the Nikkei report, Leong Hup has managed to secure funding commitment from 10 cornerstone investors including the likes of the Employees Provident Fund (EPF), ahead of its initial public offering (IPO) to raise up to US$400mil (RM1.65bil).
It said the current valuation was “well-received” by the cornerstone investors, which also included insurer AIA Group and prominent investor Chua Ma Yu.
Quoting sources, the report said Leong Hup is expected to launch its prospectus as early as next week, and list on the stock exchange next month.
According to an analyst with a local brokerage, a 15 times valuation for Leong Hup was “reasonable and quite fair”.
Early last year, a Reuters report, quoting sources, said Leong Hup was targeting to raise proceeds of US$600mil (RM2.5bil) from the IPO, which translated to a valuation of up to 30 times.
Leong Hup, together with QSR Brands (M) Holdings Bhd, which operates the KFC and Pizza Hut chain of restaurants in Malaysia, were among the highly anticipated IPOs this year after a drought of IPOs in the country last year.
According to recent media reports, however, QSR Brands has decided to shelve its planned IPO indefinitely.
Citing sources, Reuters reported earlier this month that QSR had shelved plans for an IPO that could have raised as much as US$500mil as potential investors viewed its valuations as too high.
Leong Hup is among the largest fully integrated producers of poultry, eggs and livestock feeds in South-East Asia.
The group operates in an industry with significant barriers to entry, such as industry know-how and regulatory restrictions, providing it with a sustained competitive advantage.
Its profit after tax and minority interests saw a two-year compounded annual growth rate (CAGR) of 32.4% between 2015 and 2017, while the CAGR for revenue during the period at 8%.
It is the biggest producer of day-old-chicks (DOC) – or newly-hatched chicks – in Malaysia and among the top three producers of DOC in Indonesia and Vietnam.
According to its website, the group’s operations span across Malaysia, Indonesia, Vietnam, Singapore and the Philippines, encompassing feedmill manufacturing and marketing and the integrated poultry supply chain – from breeding and rearing of grandparent stock, parent stock and DOC through to contract farming, slaughtering, food processing as well as supply of table eggs.