The Usual Under Priced Good IPO That Goes Nowhere After Day One

MSM to be listed on June 28 has garnered a lot of investors' interest. Its a steady business, and as in any good "linked" vehicles going for IPOs, there will be a "need" to distribute to selected government linked investing institutions. That being the case, the IPO will be priced attractively. That being said, the public will not get much of it but can only watch how wonderfully oversubscribed it will be.



Strangely, or maybe not so strange after all, the IPO came along just a year after Robert Kuok sold Malaysian Sugar Manufacturing and the remaining 50% of Kilang Gula Felda Perlis to Felda. Robert has been privatising his vehicles in Malaysia and HK where they made sense. Listing is not a priority for him. Robert thinks its better to wash his hands clean for sugar manufacturing and distribution in Malaysia probably because growing it further is difficult and sugar is a controlled item as well.

Robert swiftly acquired, via PPB/Wilmar, Sydney-based CSR Ltd’s sugar business (Sucrogen) for A$1.75bil (RM4.73bil). Sucrogen is the largest raw sugar producer in Australia, and through Queensland Sugar Ltd (QSL), the second largest exporter of raw sugar in the world. Robert Kuok owns some 200,000ha of sugar cane plantation in Indonesia. Let it be known that Robert has also bought huge tracts of land in the Phillipines, possibly for the same purpose. So, the sugar king basically wanted a global platform.

MSM will be a successful listing but will then trade like a REIT. Its a controlled item, contracts are locked in every 3 years. No chance of supernormal profits. Although they say say they will look for acquisitions overseas, its going to be difficult.



They aim to pay 50% of profits as dividend which will bring the dividend yield to 5% based on IPO price of RM3.38. Its relatively safe but upside will be very limited after the first day. Expect fair trading range of RM3.70-3.90.