Affinity-backed Leong Hup seeks up to $288m in Malaysia IPO

The company plans to sell 937.5 million shares at MYR1.10 apiece, according to a prospectus. Affinity will offload 421 million shares, which will see its holding fall from 23% to 9.89%. If the overallotment option is fully exercised, the size of the offering will reach 1.08 billion shares, with Affinity’s portion of the sale rising to 491.4 million shares.

The private equity firm acquired a minority stake in Leong Hup in 2014 at a valuation of approximately $600 million, excluding debt. Based on the IPO pricing, Leong Hup will have a market capitalization of around MYR4 billion ($968 million).

The company was listed in Malaysia until 2012 when the family owners completed a privatization worth MYR427 million. They began talks with Affinity towards the end of that process, having recognized the need to bring in a partner to facilitate succession planning and professionalize operations. Between 2014 and 2017, Leong Hup invested MYR1.24 billion in its subsidiaries – including Indonesia-listed Malindo Feedmill – in order to consolidate assets under a single entity.

Affinity also supported expansion within Southeast Asia, including deepening the company's presence in Vietnam and Indonesia and consolidating its position in Malaysia. Leong Hup, which started out as a backyard farm in the 1960s, claims to be one of the largest integrated producers of poultry, eggs and livestock feed in Southeast Asia. Malaysia, Indonesia, Singapore and Vietnam each account for at least 19% of revenue, while the Philippines is a nascent market.

In 2017, Leong Hup supplied 488 million day-old chicks, 107 million broiler chickens, and 1.73 billion eggs. It operates 241 farms and hatcheries and six slaughtering plants and works with a further 656 farms on a contract basis. Brands include Ayam A1, SunnyGold, and Ciki Wiki. The company also produced 1.97 million metric tons of livestock feed in 2017, half of which was sold to third parties.

Revenue rose from MYR5.26 billion in 2016 to MYR5.5 billion in 2017, with livestock and poultry-related products contributing 61% of the total and the rest coming from livestock feed. Over the same period, net profit increased from MYR182.5 million to MYR192.6 million, although EBITDA fell to MYR584.1 million from MYR646.8 million.

Approximately MYR208 million of the IPO proceeds have been earmarked for capital expenditure, with over half set to be deployed in the Philippines, where there are plans to build a new feedmill plant and several farms. The rest will be split between Vietnam and Malaysia.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Southeast Asia
• IPO
• Consumer
• Industrials
• Malaysia
• Agriculture
• Affinity Equity Partners
• IPO