AmResearch
Bursa Malaysia - Amendments pave way for business trust listings BUY
• According to the local dailies, Bursa Malaysia Bhd (Bursa) yesterday issued its amended rules to allow for the listing of business trusts on the Main Market of Bursa Malaysia Securities Bhd. Corresponding amendments have also been made to the Rules of Bursa Depository.
• Business trusts are corporate entities set up with a trust structure. It is managed by a trustee-manager, which holds the assets on trust for unit holders. It incorporates elements of both a company and a trust, creating a hybrid structure.
• The introduction of the business trust framework will offer investors an additional asset class to diversify their portfolio while providing business entities an alternative arrangement to raise capital through initial public offerings in Malaysia.
• A notable change from this amendment would be the ability of all eligible foreign collective investment schemes to list on the exchange as opposed to only foreign corporations. This is subsequent to the change in the legal framework which will allow for the listing of a business trust established outside Malaysia. Eligibility includes meeting the Securities Commission’s guidelines for the offering, marketing and distribution of foreign funds.
• One of the key differentiating features of a business trust to that of a corporate issuer is that corporations can now pay out dividends from their operating cash flows instead of their net profit. As such, this route would be more attractive to corporations with stable growth and recurring cash flows.
• We are positive on this development as it not only increases the competitiveness of Bursa as a market place, but will also boost its stable revenue (listing fees, participant fees, etc.), which in FY12 made up 33% of its operating topline.
• This is also in line with Bursa’s 2013 business plan and its strategic initiative to facilitate more tradable alternatives. Thus far, it has introduced exchange traded bonds (ETBS) and has other ETFs and new derivatives products in the pipeline.
• No change to our BUY recommendation on Bursa with an unchanged fair value of RM8.20/share.
Source: AmeSecurities
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