Friday 29 Mar 2024
By
main news image

KUALA LUMPUR: With no new listing in the first quarter, initial public offering (IPO) activities are expected to pick up in the next two quarters. However, market sentiment is still expected to be weak due to falling oil prices and the weaker ringgit.  

“There will be a number of IPOs taking place in the next two quarters after a quiet first quarter,” said RHB Investment Bank Bhd director and regional head of equity capital markets Gan Kim Khoon.

He said some IPOs got their approvals from the Securities Commission Malaysia (SC) in the first quarter, adding that it is a matter of “timing” in some cases.

“Some of the IPOs in the pipeline may need more time for approvals or to complete some of the procedures.” 

Gan said market sentiment is one of the key considerations when companies go for listing, but it is not the only consideration. 

With a weaker ringgit, he said some exporters are expected to enjoy foreign exchange gains which in turn will benefit local investors. 

As a whole, he said the total fund raised from the IPO market is expected to be “as good as, if not better than, last year”.

In 2014, funds raised via IPOs reached RM5.9 billion. The SC had said it expects the amount to range between RM10 billion and RM13 billion this year.

Year-to-date, there has been no IPO on Bursa Malaysia. The last IPO on the local bourse was Only World Group Holdings Bhd, which was listed on Dec 18, 2014. The exercise raised RM50 million. 

On the other hand, investment manager John Teo told The Edge Financial Daily that he is pessimistic about the IPO market this year, describing it as a “tough market” for listing. He expects a weaker IPO market in 2015 compared with last year, adding that companies will try to defer their listing plans due to weak market sentiments. 

“There will still be IPOs moving forward, but the fund raised would be lesser year-on-year,” he added. 

One of the most anticipated IPOs of the year, Edra Global Energy Bhd, which held 1Malaysia Development Bhd (1MDB)’s power assets, is now mired in uncertainty. 

The Edge Financial Daily reported on March 19 that the ministry of finance asked CIMB Investment Bank Bhd to look at a strategic sale of the power assets of 1MDB as an alternative to the planned listing of Edra Global Energy. 

The Edge Financial Daily reported earlier that the IPO of Iskandar Waterfront Holdings Sdn Bhd (IWH) would be delayed indefinitely due to poor market sentiment. 

The listing of WestStar Aviation Services Sdn Bhd, a helicopter transport firm, has also been postponed, according to media reports. 

This followed Sime Darby Bhd’s announcement that the listing of its auto business would be deferred to the second half of this year, due to weak market conditions.

Meanwhile, chief executive officer of Areca Capital Sdn Bhd, Danny Wong, said the IPO market for the first half would remain weak, but it may pick up in the second half. 

“The weak sentiment was caused by the GST (goods and services tax), lower crude oil prices, a weaker ringgit, and also the risk of credit ratings being downgraded. All these would affect the demand side of IPOs,” he said.

He said companies going for listing would definitely want a good start. 

“With all the negative factors, they would not rush to be listed in the second quarter as they are still uncertain how the GST would affect the market. It is, therefore, better for them to stay on the sidelines first,” he said.

Wong pointed out that the weaker ringgit may help to attract foreign investors to the IPO market, but he said foreign fund managers are also concerned about the political development in the country.

“The ringgit has weakened against the US dollar by about 9%, but Malaysia is actually doing quite good with an estimated gross domestic growth of 4% to 5% this year. However, some foreign fund managers are concerned about the political uncertainties due to the recent hudud issue,” he said.

He explained that foreign fund managers were also staying on the sidelines to see to what extent hudud would develop as its enforcement is expected to change the political landscape of the country. 

On March 19, 2015, the Kelantan state assembly unanimously passed the Syariah Criminal Code II 1993 (Amendment 2015) which would bring the PAS-led state government one step closer towards enforcing hudud in the state.

Nevertheless, Wong said the IPO market is more likely to pick up in the second half as the ringgit is expected to rebound with the outflow of funds with the equity market bottoming.  

Companies that are expected to list on Bursa in the second half include Sunway Construction Group Bhd, Malakoff Corp Bhd and Asian Healthcare Group Bhd.   

Last week, MMC Corp Bhd said the listing of its unit Malakoff was granted an “approval-in-principle” by the SC.

 

This article first appeared in The Edge Financial Daily, on March 30, 2015.

      Print
      Text Size
      Share