IGB Reit, a real estate investment trust focusing on retail malls in Malaysia, is set to start the management roadshow today for an initial public offering that is targeting to raise between M$770.5 million and M$837.5 million ($246 million to $267 million). The listing is scheduled for September 21.
The Malaysian Reit is the latest trust to seek a listing in Southeast Asia in the past couple of months, taking advantage of a general investor appetite for yield as market conditions remain uncertain. Far East Hospitality Trust, a hotel-focused Reit, raised $527 million from an IPO earlier this month after fixing the price at the top of the indicative range. It followed a $364 million IPO by similarly focused Ascendas Hospitality Trust in July. Both entities listed in Singapore.
IGB Reit is offering 670 million new units at a price between M$1.15 and M$1.25 apiece. The price range implies a distribution yield of between 5.4% and 5.8% for 2013, according to sources.
Its major comparables are CapitaMalls Malaysia Trust, Pavilion Reit, and Sunway Reit. They are all listed in Kuala Lumpur and yield between 5% and 5.4%, according to Bloomberg data. Given how low global interest rates are at the moment, yield plays are appealing to investors, a source said yesterday.
Aside from the higher yield, IGB Reit will also have the biggest retail property portfolio among the listed Malaysian Reits, according to a draft prospectus filed earlier this month. Its large asset base will allow it to raise capital in bigger amounts to fund future acquisitions, the trust said.
The prospectus also noted that IGB Reit is sponsored by IGB Corporation, which is one of Malaysia’s biggest owners and managers of investment properties by market capitalisation and asset value. The company has diversified interests worldwide.
About 70% of the IPO, or 469 million units, will be offered to institutional and other selected investors, while 201 million units, or the remaining 30%, will be sold to the Malaysian public and eligible directors and employees. There is no greenshoe option.
The roadshow will continue until September 3. The institutional order book opened yesterday and will close no later than September 6, when the price is expected to be fixed. The retail offering began on Monday (August 27) and will stay open until September 4. The final retail price will be determined after the institutional price is fixed.
Based on the maximum price of M$1.25 per share, IGB Reit will have a market capitalisation of M$4.25 billion at the time of listing.
Its initial property portfolio will consist of two major retail malls in Malaysia: Mid Valley Megamall and The Gardens Mall. The malls have a combined net lettable area of more than 2.5 million square feet and are part of Mid Valley City, which is one of the largest mixed-use developments in the country, according to the draft prospectus.
Both assets are mid- to high-end retail malls, where local Malaysians go shopping – not assets that are dependent on tourism. This means that IGB Reit has less volatile foot traffic, one source said.
In an encouraging sign, Far East Hospitality Trust gained 2.2% in its trading debut on Monday to finish at S$0.95, a couple of cents above its IPO price of S$0.93. It rose another 2.6% yesterday to finish at S$0.975. Ascendas Hospitality closed at S$0.885 yesterday, just above its offer price of S$0.88.
CIMB, Credit Suisse and Hong Leong Investment Bank are joint global coordinators for the deal. They are also joint bookrunners together with Citi, DBS, Deutsche Bank, Goldman Sachs, HSBC, J.P.Morgan and Maybank.
