Wednesday, March 14, 2012

DKSH: Europe put a high price on the stock, why aren't Malaysians?

After a long period staying private, DKSH (the holding company) is now going public in the Swiss market. Book builders are projecting a total value of Swiss Franc (CHF) 2.8 billion (equivalent to RM9.24 billion) effectively valuing DKSH around 18.4x.

DKSH which has a large presence in Asia is predominantly successful in China, Thailand and Malaysia. Malaysia, in my calculation provides around 12% to DKSH Group's revenue.

In Malaysia, DKSH owns 75% of the listed company. In fact, there was a rumour that DKSH was planning to delist from the Malaysian exchange, which it denied. It is currently trading at RM300 million market capitalization (price RM1.90) hence valued at below 7x PE. Besides the low free float, it beats me why DKSH Malaysia is trading at such a low PE as compared to the valuation it gets from Europe. This is a company which has potential still.

Isn't Europe supposed to be struggling? Perhaps DKSH is one of the few companies that has such large presence in Asia where investors in Europe are excited to. Another thing is that, Europe investors are excited over China rather than Malaysia, but why the vast difference in valuations?

Do check out my other blog on DKSH, here.

Reproduced from Marketwatch:

DKSH offering may revive Europe's IPO market

-- DKSH seeks to list shares on Swiss stock market in March
-- Market capitalization could reach up to CHF3 billion
-- Listing could inspire more IPOs across Europe
ZURICH -(MarketWatch)- Zurich-based trade and services firm DKSH on Thursday said it plans to float its shares on the Swiss stock exchange this month, potentially helping to revive the European market for initial public offerings that has been slowed by the region's debt crisis.
DKSH, which helps other companies expand and organize operations in countries such as China, said it will offer around 30% of its shares at a price of 42 francs ($45) to 48 francs a share. A successful listing could translate into a market capitalization of up to CHF3 billion, making the IPO one of the largest in recent years in Switzerland.
"The objectives of the IPO are to allow its majority shareholder, Diethelm Keller Holding, to diversify its investment portfolio...and to help DKSH enhance brand recognition," the company said. Diethelm Keller, which will keep a significant stake in the firm, currently holds more than 60% in DKSH.
The float will be of existing shares and won't raise new capital.
The decision to list the shares in Switzerland, the company said, is partly due to the company's Swiss roots and DKSH's already-strong local investor base--which includes Swiss entrepreneurs and financiers such as billionaire philanthropist Stephan Schmidheiny, investor Rainer-Marc Frey and private banker Pierre Mirabaud.
Analysts and traders said the IPO price range was roughly in line with expectations and reflects the solid growth prospects of the company, which is predominantly active in Asia. DKSH, which has grown at an annual rate of more than 10% in the past, posted sales in excess of CHF7 billion in 2011, with the bulk coming from markets such as Thailand, China and Malaysia.
"Given the company's 2011 net profit of CHF152 million on sales of CHF7.34 billion, a fair price-earnings ratio of around 18.4 times could result in a market capitalization of CHF2.8 billion, or around CHF45 per share," a Zurich-based trader said. Given the company's target to provide dividend payout ratio of 25%-35% of net profit, the listing price could even be higher, the trader said.
Bookbuilding for investors will run March 8-20, with the first trading day set for March 21. UBS AG  and Deutsche Bank AG are acting as joint global coordinators, and together with Berenberg Bank and Credit Suisse Group as joint bookrunners. Several market participants said that the demand for the IPO looks solid at this point.
Analysts expect that the planned listing of DKSH and the scheduled IPO of Dutch cable firm Ziggo could rekindle interest for public listings in Europe, which have come to a near standstill in 2011. According to PricewaterhouseCoopers, 430 IPOs were registered in 2011 in Europe, with momentum falling markedly in the fourth quarter, when 78 IPOs raised just EUR866 million, an 81% drop compared with the third quarter and a 83% fall compared with the year-ago period.
But 2012 could see an improvement, albeit traders say that the recovery will only be a mild one given the euro zone's protracted prospects and limited upward momentum for stock prices.
"Companies considering an IPO in 2012 should prepare and position themselves to be ready to go when the [IPO] windows open," said Martin Scholz of PwC. "Exactly when markets will pick up again is uncertain. The Olympics may be well under way by the time the markets get out of the starting blocks. In order to access the key IPO windows in 2012, companies will have to ensure that the groundwork is completed well in advance."
Among potential IPO candidates analysts point to firms such as Germany's specialty chemicals firm Evonik Industries and Siemens AG's [SI] lighting unit Osram. But they say a recovery in stock prices and an improvement of the euro zone's debt crisis is needed before these firms may go public later this year.

Serious Investing! 


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