As Malaysia gets closer to its next general election – which may happen as soon as early November – a host of initial public offerings already stuck in the pipeline because of macro and geopolitical wild swings, face further delay.

Malaysia’s IPO pipe ranges from from fast-food restaurant chain QSR Brands Holdings to palm oil plantation company Kulim.

While the economic fortunes of the resources-rich Southeast Asian country have rebounded faster than analysts expected, thanks to recovering domestic consumption and rising prices of its commodity exports, freefalling equities worldwide have deterred IPO issuers. 

If the previous elections were any guide, Malaysia’s IPO market may not reopen meaningfully until the second half of 2023, said an equity capital markets banker in Kuala Lumpur. 

Prior to the last general elections, in May 2018, there was “almost nothing” in terms of IPO activity, and the market took a long time to reopen after a change of government back then, he said. 

Following months of speculations, Malaysian Prime Minister Ismail Sabri Yaakob announced the dissolution of parliament on Monday (10 October), paving the way for the next general elections, which, according to the country’s constitution need to take place within 60 days from parliament’s dissolution. 

The Straits Times reported the following day (Malaysia general election: Possible poll dates | The Straits Times) that the elections could happen during early- to mid-November, to avoid disruptions from the monsoon season, which cost many lives in widespread floods in December 2021. 

Year to date, Malaysia Inc. has raised USD 690m from 27 listings, an improvement on full-year 2021, when 25 IPOs were priced for USD 602m, based on Dealogic data. 

That’s mainly because markets were initially expecting elections to happen in 2023. 

Constitutionally Malaysia has up to September next year to elect a new parliament. The polls have been pushed forward because of political infighting, which has created a revolving door for the prime minister position. Ismail Sabri is the third prime minister since the 2018 general election. 

A big IF

Perhaps put off by political uncertainty, Malaysia’s IPO market started to lose steam in the second half of 2022 when speculation about the next elections picked up un earnest. 

The second-half 2022 IPO issuance fell 67% to USD 143.3m from USD 435.84m in H2 2021, Dealogic data shows. 

Post-listing performance has also been disappointing, though this is primarily because of market volatility. 

Of the 27 IPOs priced this year, 15 have traded below water, with SIAB Holdings posting the largest decline of 53% since debut, while among the 11 advancers, SFP Tech Holdings Bhd has delivered the best gain of 128% since listing, Dealogic data shows. 

The benchmark Kuala Lumpur Composite Index (KLCI) has lost over 12% year to date, albert better than the MSCI Asia Pacific Index’s 30% loss.  

The general elections’ results may not sway market much, “the worst-case scenario would be the status quote,” said the banker. 

IPO candidates aren’t expected to submit filings until after a new government is formed, and it typically takes six months from filing to deal launch. 

Therefore, most new deals may not come to the market until mid-2023 at the earliest, if global macro and geopolitical environment is favorable, market watchers said. 

On the bright side, as most companies are in a good financial position they can afford to wait for a good window.

“Good things are worth the wait,” the banker said.

Please find below highlights of potential Malaysian IPOs and their related detail. 

Kulim (Malaysia) Berhard 

Sector: Plantation 

IPO size: USD 227m (USD 1bn valuation)

Latest update: Johor considers USD 1bn IPO of palm oil unit — report | Dealreporter

Notes: Oil palm plantation has plenty of ESG issues, and as most investors are moving to cleaner energy portfolios, and many already own the best in class, why would they want to get into an ESG-unfriendly sector, according to a second banker. 

QSR Brands Holdings

Sector: Leisure 

IPO size: USD 350m 

Latest update: QSR may kick off IPO in 2H22 after lengthy delays - sources | Dealreporter

Notes: CIMB, CS, UBS, RHB are arranging the fast-food restaurant chain’s IPO but the asking valuation remains a challenge, the first banker said.

TNB Power Generation 

Sector: Energy

IPO size: USD 1bn (on USD 4bn valuation)

Latest update: Tenaga Nasional plans power generation unit IPO for USD 1bn - report | Dealreporter

Notes: Very early stage still. The power generation unit under Tenaga Nasional is scaling up its renewable energy which would make it attractive, said the second banker. 

OMS Group Sdn Bhd.

Sector: Telecom hardware

Deal size: USD 300m-USD 350m

Latest update: Sub-Sea Cable Firm OMS Is Said to Mull $300 Million Malaysia IPO - Bloomberg

Note: The Malaysian undersea cable installer hasn’t yet filed for the IPO, which could happen in Singapore. (second banker)

MTT Shipping and Logistics

Sector: Transportation

IPO size: Around USD 100m

Latest update: MTT Shipping and Logistics heads for main market listing on Bursa Malaysia | Dealreporter

Note: The company’s profits surged while sector multiples have come off peaks, so MTT may end up being valued at less than 1x earnings assuming the deal size is set around USD 100m, said the first banker, who added banks are trying to engage cornerstone investors for the deal. The second banker said the deal has become highly unlikely given a reversal in the sector outlook.