Malaysian firms take to private placements to shore up funding

The KL Tower is seen, with a background of the cityscape in Kuala Lumpur, Malaysia.

Malaysia’s corporates are turning to private share placements to raise funds as demand for public listings of bonds and stocks wanes and banks cut back on their lending.

The Southeast Asian nation’s stock exchange saw 151 deals in the first nine months of the year, compared with 76 in the same period of 2019, according to data compiled by Bloomberg. Volumes jumped 25% to 1.41 billion ringgit ($339 million), the data show.

For cash-strapped corporates, private placements can allow them to raise cash quickly through dealing directly with investors, even though they may get lower valuations than via the public markets. The fund-raising situation has become more acute as Malaysia’s export-driven economy contracted the most since the 1998 Asia financial crisis amid the pandemic.

Coupled with falling commodity prices, a shrinking economy has put a strain on corporate earnings and cash flows. Many of the companies doing private placements had losses in the recent quarter and will likely remain weak in the coming months, said Bharat Joshi, an investment director who oversees the Southeast Asian region at PT Aberdeen Standard Investments Indonesia.

Tighter Funding

“Banks are unlikely to extend credit to these companies, which results in them raising from private placements instead of paying a hefty premium in the bond market,” said Jakarta-based Joshi.

Companies in Malaysia aren’t alone in facing a tighter funding situation: some Indonesian publicly listed firms have also been resorting to rights offers and private share placements.

Malaysian corporates were only able to raise 4.15 billion ringgit on the local stock exchange through primary and secondary offerings as of Sept. 30, a 43% drop from the comparable period in 2019. Bond sales in all currencies fell 13% to $28 billion.

“Private placement shall continue to be an attractive avenue to raise funds for public-listed companies, subject to availability of investors, regardless of the equity-market conditions,” said Roslan Hj Tik, Kuala Lumpur-based executive director at Kenanga Investment Bank Bhd.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.