PETALING JAYA: Faced with heavy sell-off in the local bourse, the initial public offering (IPO) market has been weak this year. Looking at the current situation, the recent postponement of QSR Brands (M) Holdings Bhd IPO may indicate that this is not the best timing for new listings.
Association of Corporate Finance Advisers chairman Datuk Wan Asmadi Wan Ahmad told SunBiz that based on the current performance of the local market, those seeking valuation premium from the listings are expected to postpone their IPOs as the valuations may not meet the parameters expected by the IPO candidates.
Just over a week ago, QSR and its shareholders decided to re-time its IPO following discussions with its bankers. The IPO could have raised as much as RM2 billion but it was postponed as potential investors balked at its valuations. If it had gone ahead, QSR would have been the biggest IPO in Malaysia in about two years.
Wan Asmadi, who is also DWA Advisory Sdn Bhd managing principal, said for Main Market listing, IPO candidates will always be there but they are more likely to proceed when the market situation improves.
“Large main market listings would need to attract cornerstone investors, asset management companies and retirement funds as their target investors and thus market appetite of these funds managers would need to be carefully gauged before launching of any listing. As for the ACE and LEAP markets, the takers would be mostly private investors, including high net worth and sophisticated investors that may look for good upside especially in the current market situation,” he explained.
Nonetheless, he said an IPO remains a viable alternative for candidates seeking to raise funds and enhancement of equity capitalisation, especially for ACE and LEAP Markets, which cater more to small and medium enterprises.
“We expect last year’s trend to continue to this year and more IPOs will be launched in the second half of this year, hopefully when the situation is more certain and positive economically,” said Wan Asmadi.
Bursa Malaysia has seen five listings on the ACE Market and the LEAP Market this year, raising RM112.66 million so far. This compares with 22 IPOs last year which raised RM633.12 million. There were 11 listings on the LEAP Market, nine on the ACE Market and only two on the Main Market in 2018, namely Mi Equipment Holdings Bhd and Techbond Group Bhd.
Upcoming listings are Smile-Link Healthcare Global Bhd (tomorrow) and TT Vision Holdings Bhd (May 9), both on the LEAP Market.
IPOs in the Main Market pipeline include the likes of HPMT Holdings Bhd, Leong Hup International Bhd, UWC Bhd and AME Elite Consortium Bhd.
Meanwhile, IPOs in the ACE Market pipeline are Tashin Holdings Bhd, Mattan Bhd, Greatech Technology Bhd, SDS Group Bhd, Mestron Holdings Bhd, I-Stone Group Bhd, Kim Hin Joo (Malaysia) Bhd, Spring Art Holdings Bhd, MTAG Group Bhd and Solarvest Holdings Bhd, among others.
Prime Minister Tun Mahathir Mohamad has said the government was considering listing state-owned entities on the stock market as part of efforts to reduce debt and liabilities.
During the tabling of Budget 2019 last year, Finance Minister Lim Guan Eng had also mentioned the government’s plans to set up an airport real estate investment trust for the “securitisation” of government assets.
An investment banker who declined to be named said the IPO market remains positive as interest in IPOs has increased compared with last year, based on enquiries from companies indicating their interest to list.
“You may not see a mega IPO like QSR but there is more interest from the smaller companies compared with last year,” the corporate financer of an investment bank said, noting that the number of companies going for listing on the Main Market and the ACE Market this year should be higher than last year.
He explained that there is always more interest for listing on the ACE Market and the LEAP Market compared to the Main Market and this is not something worrisome.
“We shouldn’t just focus on big IPOs. We should also focus on the smaller companies where we can help them to raise funds to help them to grow their business to the next stage, which is also important for the capital market.”
He said there is more and more interest for IPOs now following the revival of the East Coast Rail Link project, a sign that things are better compared to previously where projects were under review and there was no clear direction from the government.