This article first appeared in The Edge Malaysia Weekly on September 28, 2020 - October 4, 2020

RAKUTEN Trade Sdn Bhd, a 50-50 joint venture between Kenanga Investment Bank Bhd and Japan’s Rakuten Securities Inc, plans to launch an initial public offering (IPO), according to people familiar with the matter.

Talks about the potential IPO are still in the early stages and details, including size and timing, could still change, according to sources. When contacted, Rakuten Trade declined to comment.

“The IPO may make for a good story with Rakuten being a global brand,” an investment banker tells The Edge.

In May, Rakuten Trade, the country’s first fully digital equities broker, announced that it had made its maiden profit in April after three years in operation.

Market observers say it is likely to report its first full-year profit for the financial year ending Dec 31, 2020 (FY2020), given the recent resurgence in retail participation which fuelled record-high trading activities in the equities market.

Companies Commission of Malaysia (SSM) data shows that Rakuten Trade narrowed its net loss by 11.4% to RM16.26 million in FY2019 from RM18.36 million in the previous year, while revenue grew 65.8% to RM9.61 million from RM5.8 million in FY2018. The company’s net book value stood at RM31.82 million as at Dec 31, 2019.

Rakuten Trade acting CEO and chief marketing officer Kazumasa Mise told The Edge in July that the brokerage saw a surge in the number of activated accounts during the Movement Control Order period.

“Given that our platform is fully digital, from account opening to trading, settlement, education and support, coupled with the market performance, Rakuten Trade became the broker of choice during the lockdown. Support from investors continued to grow despite restrictions being reduced since then,” he said.

Mise added that the contactless mode of trading resonated greatly with its primarily millennial target market who are typically digitally savvy. “We appeal to a younger group of investors below the age of 40 — and particularly to those with no prior investment experience.”

Rakuten Trade currently has more than 110,000 activated accounts. Since May 2017, the brokerage has contributed to more than RM20 billion in total trading value on Bursa Malaysia. It has a retail market share of almost 7%, while clients’ assets under trust totalled more than RM2 billion as at July 14.

The most recent corporate deal involving a brokerage was CIMB Group Holdings Bhd’s acquisition of stockbroking firm Jupiter Securities Sdn Bhd for RM55 million in September 2017. Jupiter Securities has since been renamed CGS-CIMB Securities Sdn Bhd in a joint venture with China Galaxy Securities Co.

So far this year, there have been 13 IPOs, of which six were on the LEAP Market. There was only one Main Market listing (InNature Bhd) and six on the ACE Market, according to Bursa data.

There are more IPOs to come. Samaiden Group Bhd is set to launch its prospectus for an ACE Market listing on Sept 28 that is expected to raise RM29.4 million. MR DIY Group (M) Bhd, the country’s biggest home improvement retailer, announced plans for a Main Market listing that could raise as much as RM2 billion.

Bloomberg reported that Malaysian glove makers Harps Holdings Sdn Bhd and Smart Glove Corp are also seeking listings that could raise about RM2 billion and RM1 billion respectively, riding on investor enthusiasm for glove makers.

Between January and August this year, trading volume across the local bourse totalled 2.22 trillion, with the trading value amounting to RM1.3 trillion. The benchmark FBM KLCI has rebounded 23% from its March low, but is still down 5.5% year to date as at its close of 1,500.8 points last Thursday.

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