7-Eleven gets SC aproval for re-entry into Bursa Malaysia; 7-Eleven has 1,542 outlets across Peninsular Malaysia, Sabah and Sarawak. The firm owns 1,376 of its stores, while 166 are managed by franchisors.

Updated: Wednesday February 12, 2014 MYT 8:40:14 AM

7-Eleven gets SC aproval for re-entry into Bursa Malaysia

BY TEE LIN SAY

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Sources said the approval came about on the back of lower valuations accorded to the country’s largest operator of 24-hour convenience stores

PETALING JAYA: The Securities Commission (SC) has approved the listing of convenience chain outlet 7-Eleven Malaysia Holdings Bhd, paving the way for its re-entry into Bursa Malaysia.

Sources said the approval came about on the back of lower valuations accorded to the country’s largest operator of 24-hour convenience stores.

“The lower valuations came about due to higher disclosure standards that the SC imposed on the company for the benefit of potential investors.

“In the prospectus, the company would make more apparent certain facts such as declining same-store-sales,” a source said.

When listed, it would be the third time that the 7-Eleven chain that belongs to tycoon Tan Sri Vincent Tan will make its presence on the local stock exchange.

Tan, who is a substantial shareholder of Berjaya Corp Bhd that controls a plethora of listed entities ranging from property to automotive and gaming, first listed the convenience store in 2001.

He took it private in 2007 and re-listed it as Berjaya Retail Bhd in August 2010.

Berjaya Retail Bhd comprised a chain of 7-Eleven convenience stores and Singer outlets that dealt with direct selling of consumer durables.

Berjaya was listed at a price of 50 sen with a price earnings ratio of some 21.7 times. At that price, it had a market capitalisation of RM749mil.

However, seven months later, Tan via his vehicle Premier Merchandise Sdn Bhd, embarked on privatising Berjaya Retail at 65 sen each, or a 30% premium over its IPO price.

In July last year, Tan made his intentions known that he was planning to relist 7-Eleven, a move that took the market by surprise.

However, in November, there were reports that the SC had rejected the submission for listing.

Unconfirmed reports then attributed the reasons to the toppish valuations. It was looking to list at valuations of some 30 times its historical earnings.

“The authorities were not convinced that the company had undergone significant changes to its business to warrant a re-listing and enhanced valuations,” said a source.

While the pricing of the IPO and its gross proceeds are not yet known, sources say the deal size will be smaller than the RM750mil it had targeted to raise last year.

Based on the draft exposure prospectus, for the nine months ended Sept 30, 2013, 7-Eleven recorded a 5.7% increase in net profit to RM36.6mil on the back of 18.6% jump in revenue to RM1.25bil over its previous corresponding period.

The nature of the business is such that the margins are thin and this tends not to attract much investor interest.

Before Berjaya Retail was taken private in 2011, it barely attracted interest and was a thinly traded counter.

The lack of interest in the stock could have been due to its high PE, where investors felt there was limited upside.

Meanwhile, based on its recent draft prospectus exposed in January, the new IPO will offer up to 530.33 million shares for sale on the Main Market of Bursa Malaysia, of which 348.94 million shares come under the offer for the sale portion and 181.39 million are new shares.

Institutional investors have been allocated 490.78 million shares, and retailers 39.55 million shares.

Some 86.3% of the proceeds is earmarked for capital expenditure (capex) from 67.9% previously, while the portion for working capital has been reduced to 3.5% from 24.2%. The remaining 10.2% will be used to defray listing expenses.

The draft prospectus also shows that Kenanga Investment Bank Bhd has joined the fray as principal adviser, book-runner and underwriter alongside Maybank Investment Bank, which had originally secured the IPO mandate for Seven Convenience together with CIMB Investment Bank, CLSA, and UBS AG.

7-Eleven has 1,542 outlets across Peninsular Malaysia, Sabah and Sarawak. The firm owns 1,376 of its stores, while 166 are managed by franchisors.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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