(Adds comments from Malaysian prime minister, details)
KUALA LUMPUR, Sept 21 (Reuters) - Pay-TV firm Astro Malaysia Holdings will miss out on a pool of potential institutional investors in its planned $1.5 billion initial public offering (IPO) in October because it does not comply with Islamic law.
Malaysian firms are deemed sharia-compliant investments if they adhere to Islamic law, according to standards published by the country’s Securities Commission.
Astro, which is Malaysia’s largest pay-TV firm by market share, is involved in entertainment activities such as broadcasting and music and therefore outside those rules.
“Astro will be losing out some business from certain institutional investors, but the stock’s fundamentals could make it compelling enough to warrant plenty of retail and foreign interest,” said a local fund manager, speaking on condition of anonymity.
Major Malaysian investors which dedicate large amounts to sharia-compliant firms include the Employees Provident Fund (EPF), public sector pension fund Kumpulan Wang Persaraan (KWAP), and Lembaga Tabung Haji (LTH).
National pilgrimage fund LTH manages 35 billion ringgit ($11.39 billion), all of which is restricted to sharia-compliant investments. Around a third or 164 billion ringgit of EPF’s assets are sharia-compliant.
Sharia-compliant funds have accounted for 10.6 percent of total assets under management in Malaysian equities over the past two years, according to calculations by Reuters based on Securities Commission data.
“(Sharia compliance) does widen your investor base ... but there are far more conventional funds compared with sharia funds,” said Abdul Jalil Abdul Rasheed, CEO of Aberdeen Islamic Asset Management, who helps manage $3 billion.
Institutional investors have oversubscribed their portion of what will be the third-most valuable listing on Malaysia’s buoyant equities market this year, two sources said this week, highlighting growing interest in Malaysian deals and the emergence of Southeast Asian capital markets.
Equity issuance in Malaysia has hit $7.9 billion already in 2012, up from $3.9 billion in all of 2011. Shares listed in this year’s Malaysian IPOs have gained 17 percent on average, according to Thomson Reuters publication IFR.
“This is widely expected to be amongst the world’s biggest listings in 2012, confirming Malaysia’s reputation as one of the best and brightest destinations for investment - a safe haven for capital, with businesses and exchanges that are thriving despite global uncertainty,” Prime Minister Najib Razak said in a statement, referring to Astro.
Astro will use the proceeds from the listing to repay bank loans, for capital expenditure, working capital and listing expenses, the term sheet showed.
Interest in Astro, a firm controlled by Malaysia’s second-richest man Ananda Krishnan, reflects growing international interest in the country, and follows other high-value IPOs there in recent months.
Malaysian funds KWAP and LTH were cornerstone investors in palm oil firm Felda Global Ventures Holdings Bhd, which raised $3.3 billion in a June listing, and LTH also participated in IHH Healthcare Bhd’s July listing.
$1 = 3.0725 Malaysian ringgit Reporting By Yantoultra Ngui and Al-Zaquan Amer Hamzah; Editing By Daniel Magnowski