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 (S$0.19) with a price earnings ratio of some 21.7 times. At that price, it had a market capitalisation of RM749mil (S$286mil).
However, seven months later, Tan via his vehicle Premier Merchandise Sdn Bhd, embarked on privatising Berjaya Retail at 65 sen each, or a 30 per cent 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 per cent increase in net profit to RM36.6mil on the back of 18.6 per cent 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 per cent of the proceeds is earmarked for capital expenditure (capex) from 67.9 per cent previously, while the portion for working capital has been reduced to 3.5 per cent from 24.2 per cent. The remaining 10.2 per cent 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.