Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on January 30, 2023 - February 5, 2023

New listings are the hottest item on Bursa Malaysia these days. It is common to see companies that are listed on the ACE Market jump several-fold above their initial public offering (IPO) price soon after listing.

The demand for shares of new listings, especially companies going for the ACE Market, is so huge that all are taken up, including the 12.5% allocated to bumiputera investors approved by the Ministry of Trade and Industry (Miti).

But this was not the case a year ago.

Companies that were listed in 2021 and early 2022 could not fulfil the bumiputera equity portion because the stock market was subdued. The listing was approved on condition that the companies place out the 12.5% block to approved Miti investors one year after achieving the profit requirement for companies seeking a listing on the Main Market.

Or, the company was to place out the shares to approved bumiputera investors within five years of listing on the ACE Market.

In the last one week, two companies that were listed a year ago attempted to fulfil the bumiputera equity conditions. And the reception to the shares was not great.

Coraza Integrated Technology Bhd and Ecomate Holdings Bhd offered their shares to approved bumiputera investors. But the take-up rate was relatively poor compared to new listings.

Coraza was listed in January last year with a market capitalisation of RM120 million. Today, Coraza commands a market capitalisation of RM395 million, which is more than three times its value at IPO.

As for Ecomate, it was listed in late 2021 and valued at RM115.5 million then. Ecomate’s market capitalisation is now at RM250 million, which is more than double the value at IPO.

While the valuations of both companies have jumped significantly, they were not matched by an exponential increase in earnings.

It explains the muted response from bumiputera investors compared to new IPOs.

The bumiputera investors are probably wary of taking up shares in a company that has significantly appreciated in value within a year. Although the shares are offered at a discount to market price, the valuations are probably on the high side.

This is also a signal to those holding shares in newly listed IPOs that have jumped several-fold. They should probably exercise caution.

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