Malaysia Capital Markets Deal: Mr DIY Group’s M$1.5bn IPO

IFR Asia Awards 2020
3 min read
S Anuradha

Improved outlook

Home improvement retailer Mr DIY Group revived international interest in Malaysian listings in October with the country’s largest IPO in three years and the largest ever from its retail sector.

The M$1.5bn (US$364m) IPO had to overcome the uncertainty around the coronavirus crisis and Malaysia’s fraught political environment, with months of travel restrictions and a leadership vacuum making investors think twice about adding to their exposure.

Those who participated were well rewarded, however, with the stock gaining 88% by the end of the year.

Mr DIY put its IPO plans on hold in March after Malaysia imposed strict lockdowns to curb the Covid-19 outbreak, slamming the retail sector. However, work resumed as revenues rebounded strongly after the Hari Raya Puasa festive season in May, helped by a lack of other spending opportunities as a result of travel restrictions and other Covid-19 measures.

Mr DIY reported revenues of M$233.5m and M$232.1m in May and June, up from just M$51m in April and more than 20% above average monthly revenue of M$189.6m in 2019.

The speed of the recovery allowed underwriters to position the stock as a Covid-resilient play on South-East Asian retail that offered significant upside from local and regional expansion.

The IPO price was seen as investor-friendly, representing a 2021 price to earnings multiple of 21 at a time when some competitors were trading in the mid-20s.

To kick-start the country’s subdued listing market, in the first waiver of its kind, Malaysia’s securities regulator allowed Mr DIY to float a 15% stake rather than the usual 25%.

In total, 942m shares were sold at a fixed price of M$1.60, including mostly secondary shares from founder Tan Yu Yeh’s Mr DIY Holdings, private equity firm Creador and 21 individual shareholders.

One quarter of the deal went to cornerstone investors, including a number of high-profile global funds that were participating in a Malaysian IPO for the first time in nearly six years.

International buyers included Aberdeen Standard, BlackRock, Fidelity, Matthews, Pictet and Trinity Alps, with 60% of the cornerstone tranche going to foreign investors.

Some 130 investors participated in the institutional tranche and the top 20 lines, including cornerstones, were allocated 70% of the deal. Long-only institutions were allocated 83% of the deal, ultra-high-net-worth investors 11% and hedge funds 6%.

High institutional demand led the company to claw back nearly 69% of the 471m shares reserved for local Malay-origin investors. Domestic investors took up 66% of the total deal and international funds 34%.

CIMB, Credit Suisse, JP Morgan, Maybank and RHB were joint global coordinators and joint bookrunners with UBS.

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