IPO Round-Up 2018: Year of the LEAP market

This article first appeared in Capital, The Edge Malaysia Weekly, on December 31, 2018 - January 06, 2019.
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THE local bourse has been busier this year in terms of initial public offerings (IPOs) than last year. More than half of the IPOs took place after the 14th general election on May 9.

It is interesting to note that the LEAP Market IPO scene was the busiest this year with the debuts of 11 companies compared with two in 2017. The LEAP Market (Leading Entrepreneur Accelerator Platform), is a complementary marketplace for small and medium enterprises. It is relatively new, offering an alternative fundraising option for SMEs for slightly over a year. It is worth noting that Malaysia is the first Asean country to create such a platform for SMEs. It is seen as a stepping stone for companies to eventually transfer to the Ace Market or even the Main Market in the future.

In total, there were 22 local IPOs this year, compared with 14 listings in 2017. But, in terms of the amount raised, it was starkly lower at RM633.12 million this year compared with RM7.38 billion last year.

This is largely because most of the companies that made their debuts were LEAP Market listings, with 12 below RM10 million.

Only one company raised more than RM100 million — Mi Equipment Holdings Bhd — while the second highest amount was raised by Binasat Communications Bhd at RM57.95 million.

The range in amounts raised is significant. The lowest was SL Information Bhd, which raised RM1.89 million, while Mi Equipment Holdings raised RM217.8 million.

While the LEAP Market may have stolen the show this year with a record number of listings, it was Ace Market Revenue Group Bhd that took centre stage with the overwhelming response to its IPO from the public. Its share price performance has also impressed since listing.

The public portion of its IPO was oversubscribed 11.22 times, with 3,699 applications for 136.21 million new shares received for 11.14 million new shares available for public subscription. The company raised RM26.79 million and since its debut on July 18, when it closed at 62.5 sen, the cashless payment solutions provider has risen a whopping 119.2% to RM1.37 on Dec 21.

Of the LEAP Market debutants, SL Information has seen the best share price performance this year. Though it raised the smallest amount this year, it has impressed with an 82.61% share price increase to 42 sen on Dec 21, since its close of 23 sen upon listing on May 21.

The worst performer among the 22 stocks listed this year is Ace Market company Nova Wellness Group Bhd. On its listing day on July 20, it closed at 76 sen apiece. However, it has since shed half its value to close at 31.5 sen as at Dec 21.

In its report on Global IPO Trends for 4Q2018, Ernst & Young says that compared with other stock exchanges in Southeast Asia, Malaysia maintained its spot in fourth position.

According to the report, Indonesia leads the scoreboard with 52 IPOs that raised US$1.2 billion, followed by Thailand with 20 IPOs, raising US$2.5 billion, and Singapore with 13 IPOs that brought in US$0.5 billion.

It is worth noting that only Indonesia saw an increase in the amount of funds raised (66%) while Thailand, Singapore and Malaysia saw declines.

This implies that Malaysia’s IPO trends are similar to those of other countries in the region.

The report further states that geopolitical uncertainties, trade tensions and macroeconomic conditions in the region are to blame for the slower IPO volume this year, which fell 7%, while proceeds were significantly lower, by 34%.

EY also foresees that IPO activity in 1H2019 will remain relatively quiet and does not see a rebound in the region next year.

“If geopolitical and trade uncertainties stabilise globally, then this region may see an uptick in IPO activity in the second half of 2019. During the second half of 2018, the Thai and Indonesian exchanges experienced higher IPO activity, while other emerging markets were marred by volatility in equity markets. We expect this trend to continue into 2019,” it says.

Looking ahead, there are two potential IPO listings that could bring excitement to the market. One is the relisting of QSR Brands (M) Holdings Bhd — the company that carries family favourites such as Kentucky Fried Chicken and Pizza Hut in Malaysia.

Another is the relisting of Leong Hup International Bhd, a livestock feed manufacturer that is also involved in egg production and poultry farming.

It has been reported that QSR is looking at a price-earnings ratio of more than 30 times while Leong Hup is seeking a PER of over 20 times.

While the listing dates of these two possibly huge IPOs are not known yet, the market can look forward to two companies that are seeking to list on the Ace Market in January.

Information on Bursa Malaysia’s website shows that DPI Holdings Bhd’s tentative listing date is Jan 7, 2019, while Gagasan Nadi Cergas Bhd is expected to list on Jan 8.

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