This article first appeared in The Edge Financial Daily, on January 18, 2016.

KUALA LUMPUR: If investors are looking to the first few trading days of the year for indications of annual performance of the initial public offering (IPO) market, then 2016 is seen as another rough year.

With the FBM KLCI starting off the new year in negative territory and remaining weak in line with major global markets last week amid concerns about oil oversupply and prospects for global growth, potential issuers may be spooked when it comes to floating their companies on the local bourse this year.

Surprisingly, however, the investment bankers that The Edge Financial Daily spoke to seemed quite bullish about the outlook for IPOs floats this year, predicting as many as 20 IPOs.

If this pans out, it could nearly double last year’s IPO count, which saw 11 new listings on Bursa Malaysia, down from 14 in 2014 and 17 in 2013.

Affin Hwang Investment Bank Bhd said while 2015 was a dismal year for IPOs, there may be some hope for 2016.

“Already, we are seeing this year’s pipeline filled up with mid-cap companies from industries ranging from retailing to manufacturing, which are undoubtedly encouraged by the fact that mid-cap listings such as Aemulus Holdings Bhd, Sedania Innovator Bhd and Kim Teck Cheong Consolidated Bhd have performed well since listing on Bursa in 2015,” it told The Edge Financial Daily via email.

Affin Hwang said potential listing candidates include education providers and industrial service companies that are considering an IPO among other exit options.

The investment bank added that should the ringgit and private consumption strengthen, the FBM KLCI could revert back to the 1,750-to 1,800-point level. And this could encourage other issuers to pursue listings in the second half of the year.

“As 2015 oversubscription rates have shown, these issuances would enjoy high demand from both institutional and retail investors seeking counters with an attractive equity story.

“All said, while we expect [the] amount of funds raised to remain subdued, there could be a higher number of transactions compared to last year,” Affin Hwang said.

A total of RM4.35 billion was raised last year, which was an improvement from 2014’s RM3.94 billion and half of the RM8.19 billion raised in 2013.

MIDF Amanah Investment Bank Bhd director Sherilyn Foong said there might be more ACE Market listings that perform well this year, similar to last year.

She is bullish on small and medium caps that could go for a listing this year. “This is especially the case for some with interesting themes, namely renewable energy and construction.”

Foong’s two top picks for potential listings are Helios Photovoltaic Sdn Bhd and the construction spin-off of WCT Bhd.

“I am particularly interested in Helios because of its impressive earnings and margins. It is in the solar business and has a regional presence,” she told The Edge Financial Daily.

According to the company’s website, Helios is a Grade G7 contractor — which means it can take up projects of any capacity — that builds solar projects and provides solar equipment.

According to Helios, its clients comprise those in the public and private sectors, such as the education ministry, the rural and regional development ministry, Universiti Malaysia Sarawak and S P Setia Bhd.

As for WCT’s construction arm, Foong said it will have a similar theme as Sunway Construction Group Bhd (SunCon), a pure-play construction company that analysts favour due to the construction sector’s reinvigoration by the 11th Malaysia Plan.

SunCon also builds its parent Sunway Bhd’s property developments, hence supporting its order book.

“As for big-cap [IPOs], they might see flattish performances unless market sentiment picks up again,” Foong added.

“It could be hard for big-cap companies to go for [a] listing this year, at least for the next three to six months,” said Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng.

“Foreign funds have been net sellers, while many local institutions are becoming more cautious by investing in defensive stocks or companies with strong track records,” he added. Foreign funds sold a net of RM19.5 billion last year.

Meanwhile, the first IPO this year will be a back-door listing by Ranhill Holdings Bhd. The company will officially take over Symphony House Bhd’s listing status on Feb 18.

Big names that have reportedly planned for a listing this year include Eco World International Bhd.

Other potential companies that could go public this year include Chin Hin Group Bhd, Perak Transit Bhd, Salutica Allied Solutions Sdn Bhd, Asian Healthcare Bhd, Rhone Ma Malaysia Sdn Bhd, Dancomech Holdings Bhd, Pecca Group Bhd, Bison Consolidated Bhd, Spring Energy Resources Bhd, Lotte Chemical Titan (M) Sdn Bhd, LKL International Bhd, HL Advance Technologies Sdn Bhd, Aspen Group, WCT’s real estate investment trust and construction arm, and Tan Sri Halim Saad’s KYS Education Group Bhd.

Still, many investment bankers are generally unsure of how many of these public-listed aspirants would actually take the plunge.

“So far, there have been lots of conversations [by corporates] only. If they were to go for [a] listing this year, they would have already done all the legwork and draft prospectus submissions by now,” said one investment banker.

“A lot of companies seem to be taking their time while waiting for market sentiment to pick up again,” he added.

Some big-cap names, which had deferred their IPOs, are once again being bandied about for a listing this year. One of them is Iskandar Waterfront Holdings Bhd (IWH), which was supposed to go for an IPO in 2013, before postponing its move indefinitely in 2015.

There has been speculation in the market that its chief executive officer Tan Sri Lim Kang Hoo will finally list the property development company’s shares on the Main Market in this year, but one senior investment banker doubted it.

“I would be very surprised if [IWH] can pull it off] going for a listing this year]. The lead time for an IPO takes between six months and nine months, but IWH just recently announced the deal to buy [a portion of] Bandar Malaysia. That transaction can take a few months to be completed,” the banker said.

Other major companies that previously postponed their listing, but might finally go for an IPO this year, investment bankers said, are Sime Darby Motors Sdn Bhd and Weststar Aviation Services Sdn Bhd. However, in the case of Sime Darby Motors, Sime Darby Bhd president and group chief executive officer Tan Sri Mohd Bakke Salleh was reported as saying in November last year that the group was in no hurry to list its automotive arm.

To date, only Chin Hin, Asian Healthcare, LKL International, Dancomech, Pecca Group, Spring Energy and Bison have had their IPO draft prospectuses published on the Securities Commission Malaysia’s website.