QSR IPO to be well-received

The IPO is expected to raise some RM2b in gross proceeds and have a RM6b market value upon listing


Investors are eagerly anticipating the details of QSR Brands (M) Holdings Bhd’s initial public offering (IPO) as it will provide much-needed stimulus to the market after a lacklustre 2018 showing.

This comes after Malaysia’s largest food chain operator submitted its draft prospectus in October last year, in which the company stated that the listing proceeds will be used to expand its food retail business in Malaysia.

Rakuten Trade Sdn Bhd VP (research) Vincent Lau said the market is looking forward to bigger IPOs, and that QSR is among the companies investors are waiting for in eager anticipation.

“Market sentiment is generally improving. At the end of the day, the valuation will determine how much interest, be it retail or institutional, there will be in the IPO,” he told The Malaysian Reserve (TMR).

Mi Equipment Holdings Bhd was the sole Main Market listing on Bursa Malaysia in 2018, in what was described as a lacklustre year for big-name IPOs.

QSR’s largest shareholder Johor Corp (JCorp) indicated that the IPO is expected to raise some RM2 billion in gross proceeds and have a RM6 billion market value upon listing.

This would make the QSR IPO the largest public offering since 2017 when Lotte Chemical Titan Holding Bhd raised RM3.54 billion in proceeds after listing on July 11 that year.

In its prospectus, QSR said it operates 698 KFC outlets in Malaysia and plans to expand after raising funds from the IPO. The company added that it will continue to rationalise its 388 Pizza Hut outlets nationwide for profitability.

“It is always good for a company to launch an IPO for expansion and there is still room to grow for QSR. Hence, the expansion,” Lau said.

Altogether, QSR operates over 810 KFC and 470 Pizza Hut outlets in Malaysia, Singapore, Brunei and Cambodia.

In October last year, TMR reported that there is always liquidity for IPOs domiciled in the technology, manufacturing or consumer sectors, but that subdued market sentiment will keep future IPOs price-sensitive.

The business daily also noted that QSR could provide a cheaper alternative for investors looking to enter the consumer sector at an attractive price-to-earnings (PE) ratio.

Fraser & Neave Holdings Bhd and Nestle (M) Bhd operate at an average PE ratio of 40 times to 50 times.

QSR was taken private back in 2013 as part of a RM5 billion deal between its shareholders — namely JCorp, the Employees Provident Fund (EPF) and private equity firm CVC Capital Partners.

This was in view of allowing JCorp to flatten its vertical corporate structure and reduce its multiple listings at the time for better governance and operational efficiency.

JCorp then announced its plan to relist QSR in May 2018, which it anticipated to be completed in November that same year. It is now widely expected to be completed by the first half of 2019.

In the prospectus, QSR also said the company intends to issue up to 1.46 billion shares at a price to be determined later via a book-bidding process.

From this offering, up to 1.29 billion shares or 31% of QSR’s enlarged issued share capital upon listing will be made available to foreign and local institutional investors.

Meanwhile, the retail offering will involve the issuance of 167.53 million shares, of which 125.65 million or 3% of the company’s total share capital will be made available to the public.

As part of the privatisation deal in 2013, the EPF and CVC are expected to pare down their respective interests in QSR though the quantum of the divestment is contingent on the IPO details.

JCorp holds 51% stake in QSR, followed by the EPF and CVC with 25% and 24% interests respectively.