Malaysia’s largest home center chain store's IPO
Outline of Mr DIY
Mr DIY is Malaysia’s largest home center chain store. They opened their first store in 2005 and 15 years since then, they have grown and expanded to 640 stores throughout Malaysia with 80 million customers per year. They have their shops in malls such as Aeon, Tesco, and Giant, frequently presented as an anchor tenant.
Their revenue and net profits have been rising sharply, and they have been maintaining an operating profit of 20% or above.
Mr DIY Group went public on Malaysia’s Bursa Stock Exchange on 26th October 2020 and has raised approximately RM1.5 billion from the market. As of 30th October, their market capitalisation exceeds RM11 billion.
What is IPO?
Initial Public Offering (IPO for short) is where shares of a company are listed on a stock exchange for the first time so that people can trade its shares through the stock exchange. Many founders of companies have been said to have set to get publicly listed as one of their goals. Due to this IPO, it is said that the owners of Mr DIY obtained close to RM1.2 billion from the proceeds of selling their shares to the public. In M&A, some investors such as Private Equity funds will invest in private companies with the goal of listing the company in a few years’ time as their exit strategy to recover their capital and profits.
In M&A, one method of conducting valuation of a target company is to compare it with its peer companies which are publicly listed. If this is to be done, the value of the target is discounted by about 30% because it is difficult to find a buyer of the shares and it is very difficult to sell the shares of private company as and when the acquirer wants to. In contrast, the shares of a public listed company can be sold any time due to the liquidity the stock market provides.
The name of private companies in Malaysia contains the suffix of Sendirian Berhad (SDN BHD), and publicly listed companies contain Berhad (BHD) as their suffix. However, not all companies with the Berhad suffix are publicly listed as private companies can be converted into public companies if they meet certain requirements, such as having at least 50 shareholders and that there are no pre-emption rights/transfer restriction on the shares (Section 42 Companies Act 2016).