Interesting IPO options

THE stock market sentiment may be dreary, but they say it is going to be a year of initial public offerings (IPOs).

That’s where the exictement is going to be. So, in that sense, any news on IPOs is noteworthy, even if the ideas may seem a tad outlandish.

Consider what Tan Sri Tony Fernandes said on Thursday. In announcing spectacular results, he took the opportunity to voice his vision of having a single listed Asean entity for the holding company of the AirAsia group. He urged Asean Governments to relax ownership restrictions and consider Asean investors as local investors. Fernandes didn’t elaborate on this vision. Does the plan involve creating one Asean holding company and listing it on all Asean exchanges, with the hope of getting through the listings with one entry requirement? Or does it involve creating one Asean listed company and listing it on one top Asean exchange, with Asean investors being allowed to invest in this company without any local restrictions?

The latter is ideal. To be sure, there is a decent level of inter-broking already in place, meaning that it is not difficult for Malaysians and Thais to buy Singapore-listed shares, for example.

In reality, however, the idea of a single listed Asean entity is fraught with challenges every country has foreign exchange and other control rules to maintain central bank reserves and exchange rates. So, while the stock market regulators can come to an agreement that facilitates such Asean listings, central banks will struggle with the free flow of investment monies.

Another IPO story appears on page 3, speculating that Iskandar Waterfront Holdings Bhd (IWH), the master developer of Danga Bay and Bandar Malaysia, is seeking to list. The phenomenal land and gross development value of IWH will certainly make it an interesting IPO. But if you deem IWH a master developer, then there could be some issues on its receptiveness to regulators and investors.

The downside to master developers is that earnings tend to be lumpy, as they depend on each joint venture entered into. But the upside is that master developers sit on vast parcels of prime land that can only rise in value. The question is how can investors be guided to accurately value such companies? That said, there are master developers listed in other markets such as the Philippines’ Ayala Corp, Japan’s Mitsubishi Estate Co Ltd and Indonesia’s PT Hanson International Tbk in Indonesia.