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7-Eleven M'sia to open more stores and invest $160m from IPO proceeds
Publication Date : 09-05-2014
Convenience store operator 7-Eleven Malaysia Holdings Bhd will invest up to 520 million ringgit (US$161 million) over the next three years to expand its store network, refurbish existing stores and improve its information technology systems and distribution capabilities.
The capital expenditure (capex), chairman Lena Tan said, would be funded from its initial public offer (IPO) proceeds and from its stable cash flow and internally-generated funds.
As part of its immediate expansion strategy upon listing, 7-Eleven will allocate 80 million ringgit per year to set up 200 new convenience stores and refurbish selected stores. It targets to open about 600 stores between now and 2016.
“Our business has always been cash-generative and that is how we have been able to fund some of the new stores in the past,” she told the media after the prospectus launch yesterday.
As for upgrading its IT system and building a combined distribution centre to service its outlets, Lena said the company planned to invest between 270 million ringgit and 280 million ringgit over the next two years.
Berjaya Group founder and tycoon owner of the franchise Vincent Tan said 7-Eleven had yet a lot of room to realise its full potential and going forward, the company’s strategies were to consolidate its market position and improve profitability.
“Compared with the other countries in Asia and globally, the convenience store segment in Malaysia is very underdeveloped,” he said at the launch.
Vincent noted that at end-2012, there were only 131 convenience stores per million people in Malaysia compared with 192 stores per million people in Thailand.
He added that the standalone convenience store segment was expected to grow at a compounded annual growth rate of 9% in terms of number of stores between 2013 and 2018, quoting business consultant and market researcher Vital Factor.
7-Eleven has 82% local market share, as at March 2014, with about 1,600 stores nationwide.
Vincent said post-listing, 7-Eleven would be a debt-free company, supported by strong cash flow.
After the IPO, the franchise business will be 51% owned by Berjaya Retail Bhd, which is ultimately owned by Vincent.
The 7-Eleven IPO has attracted a number of foreign funds which make up seven of the eight cornerstone investors – Capital Research and Management, Genesis, AIA, Matthews International, Macquarie Fund Management, Albizia Capital, York Capital and local fund house UOB Asset Management.
The IPO is expected to raise up to 731.85 million ringgit, excluding the over-allotment option. Its market capitalisation will be 1.7 billion ringgit.
According to the prospectus, 7-Eleven will allocate 73.8% or 184.8 million ringgit of its IPO proceeds for capex for the next three years, mainly to increase its number of stores while 17.1% or 42.7 million ringgit will be utilised as working capital for the next three years and 9.1% or 22.9 million ringgit for its listing expenses.
7-Eleven’s prospectus stated that the final retail price would be the lower of either the retail price of 1.38 million ringgit, or the institutional price and that it would be determined on May 16, post-book building process to fix the institutional price.
The IPO involves 530.32 million shares of 10 sen each including an offer of sale of up to 348.94 million existing shares and a public issue of 181.38 million new shares. The listing is slated on May 30.
The institutional offering of up to 490.78 million shares comprised up to 348.94 million offer shares to Malaysian and foreign institutional and selected investors while 141.84 million shares would be offered to bumiputra institutional and selected investors.
On the retail offering of 39.545 million shares, it said 34.05 million shares would be offered to the public and 5.50 million issue shares reserved for eligible directors and employees.
The launch of the prospectus was witnessed by Domestic Trade, Co-operatives, and Consumerism Minister Hasan Malek.
This is the third time Berjaya Group, the parent company, is listing the convenience store unit. The previous two times were in 2001 and 2010.
Maybank Investment Bank Bhd and Kenanga Investment Bank Bhd are acting as the joint principal adviser, joint bookrunner and joint underwriter. Maybank Investment Bank is the joint managing underwriter and also joint global coordinator.
UBS AG, Singapore Branch is acting as the joint global coordinator and joint bookrunner for the institutional offering outside of Malaysia while UBS Securities Malaysia Sdn Bhd is joint bookrunner for the institutional offering in Malaysia.
CIMB Investment Bank Bhd and CLSA Singapore Pte Ltd are the joint bookrunners. Inter-Pacific Securities Sdn Bhd the joint bookrunner for the International Trade and Industry Ministry tranche, joint managing underwriter and joint underwriter.
AmInvestment Bank Bhd and RHB Investment Bank are joint underwriters.
*US$1 = 3.23 ringgit