KUALA LUMPUR: Tan Sri Francis Lau Tuang Nguang, dubbed the “chicken king” of Malaysia, is making his return to the local bourse with the biggest initial public offering (IPO) in almost two years that will test investors’ appetite for chicken producers.
Leong Hup International Bhd, which owns livestock feed mills and poultry businesses in five countries, is targeting to raise up to RM1.2bil in its IPO that includes an over-allotment option.
The IPO price values Leong Hup at about RM4bil, giving it the crown of the most valuable poultry producer on Bursa Malaysia.
The company is launching its prospectus today.
Under the IPO, Leong Hup will be making an offer for sale and issuance of new stock totalling 937.5 million shares.
The bulk of these shares will be taken up by 10 cornerstone investors which include the Employees Provident Fund, the AIA Group, global agriculture merchant group Louis Dreyfus Company as well as local tycoons Tan Sri Quek Leng Chan and Tan Sri Chua Ma Yu.
About 98 million shares will be made available to the Malaysian public at a maximum price of RM1.10 a share.
Lau, who is the executive director and group chief executive officer of Leong Hup, told StarBiz that a significant portion of the proceeds to be raised from the IPO would be used to fund its regional expansion.
“We are looking at countries with strong population growth,” he said.
Leong Hup in October last year had submitted a plan to sell up to 1.6 billion shares in its IPO to raise cash to reduce its debt and pay for its expansion.
But subdued investor sentiment, which contributed to QSR Brands (M) Holdings Bhd’s decision earlier this month to put its listing plan on hold, prompted Leong Hup to scale down the size of its IPO.
QSR Brands is the operator of the KFC and Pizza Hut chain of restaurants in Malaysia and was reported to be seeking to raise RM2bil in its shelved IPO.
Despite the reduced size, Leong Hup’s IPO will be the biggest since Lotte Chemical Titan Holding Bhd, which raised RM3.77bil in July 2017.
Leong Hup is one of the major suppliers of broiler chicken in the country with an estimated 10% market share. It also controls about a quarter of the day-old-chicken market.
But the main appeal about Leong Hup is the company’s fast-growing overseas business.
The group’s venture in Vietnam has already achieved an annual revenue of over RM1bil, contributing about 18% of the group’s total in 2017, head of operations there Lau Joo Hong said in November.
Leong Hup’s prospectus, to be launched today, will provide investors, for the first time in about seven years, a clear picture of the company’s operations in five countries and its latest financial performance.
Leong Hup was the first poultry company to be listed on Bursa Malaysia in 1990 before it was taken private in 2012 by the founding Lau family.
In 2014, it was reported that the Lau family had sold a 23% stake in the company to Singapore-based private equity firm Affinity Equity Partners.
Lau, in a recent interview, said the company has, over the past five years, grown into a major regional player growing businesses in Malaysia, Indonesia, Singapore, Vietnam and the Philippines.
For the expansion in the Philippines, Lau said the company would replicate its proven business model in Vietnam there.
“We will stick to what we know best, the poultry business,” he said.
The listing exercise will provide the company with fresh capital to accelerate its expansion in the Philippines and other markets.
Lau said the company is already looking at opportunities in Cambodia, as well as expanding its downstream business.