Bourse float fuels frenzy

Shares of Bursa Malaysia, which manages the nation's stock exchange, rose as much as 19 per cent on its debut, as investors bet it will boost profit by linking with Asian exchanges and improving trading systems.

Bursa raised US$137 million ($184 million) in its initial public offering on March 4, with fund managers ordering 38 times the stock available to them.

The Kuala Lumpur-based exchange operator sold a third of the shares to fund managers at 3.20 ringgit ($1.13) each, said its adviser, CIMB, Malaysia's biggest investment bank.

"It's a frenzy out there to get the stock," said Chris Wong, who helps to manage about US$10 billion, including shares of other publicly traded stock exchanges in the region, at Aberdeen Asset Management in Singapore.

"It's a strong cashflow business and investors believe that management can restructure the business to be more efficient."

Funds raised from the share sale will help Bursa, the fourth-largest publicly traded stock exchange in Asia, to install new trading systems and set up links with exchanges in Singapore, Thailand and Indonesia.

The average daily trading of 511 million shares on the Malaysian exchange this year is 17 per cent higher than last year's daily average, Bloomberg data show.

Bursa gained 60 sen, or 19 per cent, to 3.80 ringgit about noon yesterday on the Kuala Lumpur Stock Exchange. It was the most actively traded stock, with 76.2 million shares exchanged, almost six times more than the next most-traded stock.

"We're very happy with the performance - it reflects the confidence of investors in our company," said Bursa chief executive Yusli Mohamed Yusoff.

Based on the retail price of 3 ringgit, Bursa shares are valued at a price-to-earnings ratio of 24.9 times projected earnings this year, the company said.

Singapore Exchange trades at about 18.5 times estimated earnings, according to Bloomberg data. The Australian Stock Exchange trades at 21.1 times and Hong Kong Exchanges & Clearing is trading at 19.66 times projected earnings.

"The answer to whether today's rise is justifiable at this point is probably a 'no'," said Aberdeen's Wong.

Said Singapore-based Lim Soo Hai, who helps to manage US$200 million for Daiwa SB Investment Singapore: "Valuations weren't very cheap, but the shares were overwhelmingly subscribed and most people didn't get their full allocations.

"The stock is unique in that it is a monopoly."

Bursa's profit last year fell 41 per cent to 35 million ringgit, after incurring expenses in a voluntary staff separation plan, chief financial officer Khairussaleh Ramli said on Thursday.

The exchange expects net income this year to rise to 60.3 million ringgit, and plans to pay at least 75 per cent of its profit as dividends. That would result in a yield of 3 per cent based on a retail price of 3 ringgit, Bursa said last month.

Malaysia's is the tenth worst-performing exchange in the world this year, having posted a year-to-date decline of 1.2 per cent, Bloomberg Data shows.

The 100-member Kuala Lumpur Stock Exchange Composite Index rose 14.3 per cent last year.

Malaysia's $118 billion economy expanded 5.6 per cent in the fourth quarter, the slowest in more than a year, amid lower overseas demand for semiconductors and electronics parts.

- BLOOMBERG