LET???s face it, most investors would not be interested in listening to what you have to say about the LEAP Market. First, trading is restricted to sophisticated investors, so most retail investors, or rather unsophisticated investors, could not care less.

As for the sophisticated investors, many remain sceptical because they have the perception that the companies are not sizeable enough in terms of market capitalisation and profits.

However, it is worth noting that two of them ??? Mykris International Bhd and Cloudaron Group Bhd ??? registered a profit after tax of more than RM5 million, while the average profit upon listing for the 11 companies was RM2.09 million (see Table 2).

Among the ACE Market companies that were listed last year, only Matang Bhd registered a profit after tax of less than RM5 million, while the average profit recorded was RM9.5 million.

While that may be the case, it should be noted that companies listed on the LEAP Market are fast-growing businesses that have the potential to migrate to the Main Market or ACE Market within a short span of time.

The 11 companies recorded an impressive average capital appreciation of about 45%, with SL Innovation Capital Bhd and Cloudaron leading the pack with gains of 133% and 127% respectively post listing.

Meanwhile, the share price of Metro Healthcare Bhd almost doubled while Polymer Link Holdings Bhd and Seers Bhd climbed 42% and 25% respectively.

Last Wednesday, Topvision Eye Specialist Bhd made a big debut on the LEAP Market, opening at 23 sen, or 28% higher than its initial public offering (IPO) price of 18 sen apiece.

Basically, all LEAP Market counters, except for loss-making Red Ideas Holdings Bhd, were performing better as at Nov 21 compared with their IPO price.

But the captains of these companies are not letting it go to their heads.

MyKRIS International managing director Chew Choo Soon and Seers managing director and founder Ken Foo Kwok Hsing acknowledge the strong share price performance of their companies post listing. But they point out that the low trading liquidity has to be taken into consideration.

Datuk Wan Asmadi Wan Ahmad, chairman of the Association of Corporate Finance Advisers, concurs.

???Most of the companies listed on the LEAP Market are currently trading above their IPO prices and are generally doing better than those listed on the ACE Market. However, we need to take into account the low trading liquidity. The share prices might not reflect the true value of the companies,??? he tells The Edge.

He believes the number of companies listed on the LEAP Market will grow, going by the interest shown by entrepreneurs and owners of small and medium enterprises (SMEs).

He says the stakeholders as well as Bursa Malaysia must continue their efforts to increase the traction and momentum of the LEAP Market and make it more attractive as a fundraising platform for SMEs.

???It should be made clear nevertheless that it is not a platform for SMEs to dabble with share-trading activities to see their share prices go up, but rather, it should function as a platform to groom the companies for migration to the ACE Market or Main Market where trading liquidity is better,??? he asserts.

To be fair, many LEAP Market-listed companies have churned out fairly sizeable profits, which are even better than those of many ACE Market companies.

For now, it seems like most, if not all, of the LEAP Market companies have quality . In comparison, the ACE Market is sometimes seen as a playground for traders and speculators to make easy money.

However, Wan Asmadi warns that it may be too early to say if one is better than the other.

He recalls that the ACE Market was formed in August 2009 following the revamp of Mesdaq, a platform that catered for high-growth companies.

The ACE Market, which is now in its ninth year, has more than 120 listed companies. The LEAP Market was only launched in July last year and has 11 listed companies so far.

Wan Asmadi reiterates that the LEAP Market was conceived primarily as a platform for SMEs to raise funds to accelerate their growth and gain corporate visibility, and to provide an alternative platform for sophisticated investors to invest in them.

???Whether it is the ACE Market or LEAP Market, it should be noted that no one listed company may fully satisfy the investment objectives of individual investors,??? he sums up.

WITH 15 years of experience in the industry, corporate finance advisers (CFAs) are now ready to take on a bigger role in the initial public offering space.

Even though CFAs are licensed by the Securities Commission Malaysia, they are only allowed to act as principal advisers for IPOs on the Leading Entrepreneur Accelerator Platform (LEAP) Market ??? subject to approval from Bursa Malaysia ??? and not for those on the Main Market or ACE Market.

Then, in May this year, five industry veterans ??? Datuk Wan Asmadi Wan Ahmad, Datuk Siow Kim Lun, Datin Wong Muh Rong, Wong Yoke Nyen and Datuk Feizal Mustapha ??? conceived the idea to set up an association for the CFAs, named the Association of Corporate Finance Advisers (ACFA).

Wan Asmadi is the managing principal of DWA Advisory Sdn Bhd while Siow is the chairman of MainStreet Advisers Sdn Bhd and Muh Rong is the founding managing director of Astramina Advisory Sdn Bhd. Yoke Nyen is the managing director of Wyncorp Advisory Sdn Bhd while Feizal is the chairman and executive director of advisory at BDO Malaysia.

The key objective of the formation of ACFA is to promote the spirit of working together among the various corporate finance advisory firms that are licensed under the Capital Markets and Services Act 2007 (CMSA) in contributing towards the development of the Malaysian capital market.

According to Wan Asmadi, who is the chairman of ACFA, by the collective effort of the more than 40 CFAs in Malaysia, each will be able to play a part in creating a more vibrant industry landscape for its professionals.

???The association intends to act as a platform to better organise the licensed CFAs as a professional fraternity, to facilitate more effective communication between the CFAs and regulatory authorities and possibly create an opportunity to take on greater roles within the capital market,??? he tells The Edge in an exclusive interview.

Wan Asmadi says the roles of CFAs prior to the formation of the LEAP Market were mainly to provide support in equity transactions and other relevant services.

???We are much behind our peers in other markets in the region, including Thailand, Singapore and Hong Kong, in terms of their contribution and significance to the overall capital market. Thus, ACFA has been established to ensure that the Malaysian capital market is on a par with international standards and to enhance the market???s competitiveness and attractiveness as the preferred destination for listings and fundraising.???

ACFA secretary Muh Rong opines that over the past 10 years, homegrown CFAs have been slowly establishing their credentials. Now, it is about time for them to come together and voice their views collectively to the regulators, she adds.

???We have done some work. We have established ourselves, and we have proved that boutique firms can survive. Now, give us more chance to see how we can contribute further to developing the capital market.???

Malaysian CFAs wish to compete on a level playing field with investment banks (IBs) and stockbrokers in the country, in line with global trends, Muh Rong stresses.

???If you look at Singapore, Hong Kong, the UK, the US and Australia, they all have their own financial advisory firms, which are allowed to do much more work than what we are allowed to do here in Malaysia. Thus, it is timely for us to form an association to speak as one to the relevant parties and be heard ??? that we want to do more.???

For perspective, based on information available on the SC???s website, there are about 70 holders of Capital Markets Services Licence, of which only 15 are approved principal advisers and sponsors ??? comprising exclusively IBs and universal stockbroking companies ??? that are allowed to submit listing applications for the Main Market and ACE Market.

This is significantly lower than the figures in other places such as Hong Kong, the UK, Singapore and Thailand (see Table 1).

Yoke Nyen, who is the treasurer of ACFA, highlights that in the UK, financial advisers who are governed and approved by the Financial Conduct Authority can be the sponsors for companies listing on all markets of the London Stock Exchange. ???The situation is similar in Hong Kong, Thailand and Singapore.???

He says eligible CFAs are welcome to join ACFA and play a greater role in the industry. This is timely with the availability of enterprising and competent corporate finance talents in the maturing local capital market, he adds.

It is learnt that membership of ACFA is only open to non-bank-backed and non-stockbroking-backed corporate finance advisory firms licensed by the SC to carry out the business of advising on corporate finance, pursuant to the CMSA.

ACFA vice-chairman Feizal concedes that in Malaysia, the key players in the corporate finance landscape are still IBs, which have their own association called the Malaysian Investment Banking Association.

???IBs can provide fully fledged services for the Main Market, ACE Market and LEAP Market. Anything to do with these three markets, they can make submissions. The advantage of having an association is that, as a group, it becomes the representative voice, acting on behalf of its members,??? he says.

The second set of players are stockbroking firms, which can also make submissions and act as principal advisers or sponsors. The universal brokers, 1+1 stockbroking companies, foreign stockbroking houses and stand??alone stockbroking firms have their own association ??? Association of Stockbroking Companies Malaysia.

The third set of players, says Feizal, are licensed CFAs.

???One fine day, five of us sat down and we said, ???Let???s do something about ourselves!??? So, we decided to form ACFA. We had our first meeting on May 4 at La Bodega in Bangsar. We formally registered with the Registrar of Societies in July,??? he recalls.

ACFA currently has 13 or 14 members, Feizal says, adding that the association has sent out letters to 36 non-bank-backed and non-stockbroking-backed boutique CFA firms.

???There are more than 70 licensed providers in Malaysia but only half of them meet our requirements. Those who are in our category, we have already invited them. Once we have sufficient members, we should be able to call for an AGM (annual general meeting) and then select the right committee members,??? he explains.

Muh Rong says ACFA already has the key players in the market, while other potential members are progressively joining.

???The international accounting firms, including KPMG, Deloitte and PwC, generally take a longer time to get back to us. The key local firms such as BDO, UHY and Crowe Horwath have come back to us,??? she says.

Meanwhile, Siow sees the potential for exponential growth of IPOs on the LEAP Market given the large base of small and medium enterprises (SMEs) in Malaysia.

???We are confident and optimistic that ACFA will be able to play a significant role as the voice of the industry in promoting the LEAP Market and ensuring its relevance and attractiveness.???

At the same time, ACFA will also be the additional voice to propel the Malaysian capital market to greater heights and to mobilise funds for Malaysian companies, says Siow.

???It is hoped that the regulatory authorities will provide a level playing field to licensed CFAs, in addition to IBs and universal stockbroking companies, to carry out fully fledged corporate proposal submission activities,??? he adds.

When contacted by The Edge, Bursa says the stock exchange welcomes any suitably qualified advisers to act as listing advisers on all markets.

???We will work closely with the SC in ensuring that our regulatory framework is facilitative of capital market growth while providing the relevant safeguards towards ensuring adequate investor protection,??? it says in an email reply.

Bursa says advisers play a crucial role in meeting this objective by ensuring that companies going for listing and seeking public funds meet the qualitative and quantitative admission criteria.

???With this in mind, the exchange is currently monitoring the quality and progress made by our corporate finance advisers based on the performance of their current advisory roles, including as approved advisers for the LEAP Market, before making any recommendation to the SC with a view to expand their role in the Malaysian capital markets,??? it says.

Group MD and CEO Eddie Koh Song Heng said the company also plans to strengthen its position in its traditional markets, mostly in the Philippines.

???A lot of powder has been sent to potential customers in the US for trials. The response has been positive and we are currently discussing cost and logistical matters with one of them,??? Koh said after the listing of the company on the ACE Market last Friday.

Polymer Link is planning to set up a new warehouse in Wisconsin, US, to secure targeted plastic products manufacturers that use rotational moulding.

However, the plan is still at an early stage with no additional details provided.

The warehouse will also be the company???s base to supply new customers in Canada.

Polymer Link also targets to penetrate Thailand, Papua New Guinea, Australia, New Zealand, China and India in the future.

Established in 2014, Polymer Link currently has two factories, one in Klang, Selangor, and another is Clark Free Port in the Philippines.

Polymer Link???s compounded plastic powder is used by plastic manufacturers to make products such as insulated boxes, bins, water tanks, kayaks and playground equipment.

The company debuted at 15 sen, up 25%, or three sen premium of its 12 sen offer price. The counter closed the trading day up 33.3%, or four sen, to 16 sen last week.

The company raised RM5.5 million, of which approximately 51.4%, or RM2.9 million, has been earmarked for working capital including marketing activities to support business expansion.

Other plans include expanding product range by manufacturing filler, colour and additive masterbatch.

For the financial year ended 2017 (FY17), Polymer Link made a revenue of RM41 million and a net profit of RM4.3 million.

The Philippines is the largest market which contributed 90.6% to the revenue in FY17, followed by Malaysia at 6.8% and others with less than 3%.

Its major customer is Outback Philippines ??? an insulated boxes producer for a US-brand owner on an original equipment manufacturer basis.

As current business is highly dependant on Outback Philippines, Polymer Link intends to expand the Malaysian market by working with local plastic manufacturers to supply compounded plastic powder and pellets, as well as penetrate another markets like the US.

Polymer Link is the sixth company listed on the LEAP Market, a capital-raising platform for small and medium enterprises, launched by Bursa Malaysia in July last year.

Malaysia is the first country in the region to introduce such a market that allows only sophisticated investors ??? high-net-worth entities or individuals to invest in the listed companies.

KUALA LUMPUR: Plastic powder compounds manufacturer Polymer Link Holdings Bhd, which made its debut on Bursa Malaysia’s LEAP Market today, plans to expand its business into the US market.

Group managing director and chief executive officer Eddie Koh Song said to achieve the target, the company intends to rent warehouse premises in the US and try to get customers in the country as well as in Canada.

???The company’s future plans are focused on expanding our customer base locally and internationally, creating new warehouses in the US and enhancing our product reach.

???We also target to secure new customers in the Asia Pacific, involving countries like Australia, China, India, New Zealand, Papua New Guinea, Thailand and a few European countries,??? he said at the listing ceremony of Polymer on LEAP Market of Bursa Malaysia here today.

Polymer started its trading session on the LEAP Market on a positive note, trading at a three sen premium from its initial public offering (IPO) price of 12 sen.

Polymer is the fourth company listed on the LEAP Market this year, which saw 50,000 shares traded when Bursa Malaysia opened this morning.

Polymer is expected to raise RM5.55 million via listing on the LEAP market, of which 51.4 per cent or RM2.86 million will be used for general working capital.

Out of the RM5.55 million, 27 per cent or RM1.5 million will be used for shareholder advances while 21.6 per cent or RM1.2 million will be spent for the listing expenses.

KUALA LUMPUR (April 27): Polymer Link Holdings Bhd, a manufacturing company for compounded and non-compounded plastic powder, rose as much as three sen or 25% from its offer price of 12 sen, at the company’s debut on Bursa Malaysia’s Leading Entrepreneur Accelerator Platform (LEAP) Market.

A total of 50,000 shares exchanged hands at the opening bell today.

At 10.50am, the counter rose 4 sen or 33.33%, to 16 sen, and saw 70,000 shares traded.

Polymer’s managing director and chief executive officer Eddie Koh Song Heng told reporters after the listing ceremony here today that the company’s immediate future plans are setting up a new warehouse in the United States and expanding its customer base both locally and internationally.

“We have seen a lot of opportunities to start tapping (the US market), as our main objective is to sell the material to the US and we have a lot of connections and global networking,” he said.

Speaking about the progress, he said the plan to set up a warehouse in the US is well on track, and some negotiations are in place with suppliers and customers there, addressing cost of effectiveness issues, to ensure both parties can realise the synergies.

“Meanwhile, we have exported our products to other countries, including Philippines, Australia, Thailand, Vietnam,” said Koh, adding the company’s customer base had expanded from 22 for FY15 to 44 for FY17.

He said the largest customer for Polymer is Outback Philippines, which is located in the Philippines, with total revenue contribution percentage of 88%, 93.6% and 90.6%, respectively to total revenue of the company from FY15, FY16 and FY17.

According to Polymer’s listing information memorandum, the company had earlier placed out 46.29 million shares at 12 sen each to raise RM5.55 million.

Of this, RM2.855 million is earmarked for general working capital, RM1.5 million will be used for payment of shareholders’ advances and RM1.2 million for listing expenses.

Upon listing, Polymer has an expanded share capital of 462.85 million shares. At 12 sen, the company has a market value of RM55.54 million.

KUALA LUMPUR (Sept 27): ALBAIK, a popular chicken and seafood quick service restaurant chain in Saudi Arabia, is considering Malaysia as its regional headquarters for its expansion into the Asean market.

ALBAIK does not presently have any restaurant operations in Malaysia and is currently addressing trademark issues for its entry into the market.

In a statement today, ALBAIK said the possibility of it setting up its regional headquarters in Malaysia will involve transfer of know-how and creation of thousands of jobs in Malaysia.

“This effort will also allow ALBAIK to have Malaysia become its gateway to enter the Asean market and will likely become a catalyst to spur further bilateral trade and investment opportunities between Malaysia and Saudi Arabia,” it added.

This follows ALBAIK’s appointment of DWA Advisory Sdn Bhd in March last year as the project manager to assist in undertaking the necessary feasibility studies for the possible investment, manpower recruitment, procuring of the relevant regulatory approvals and the setting up of business in relation to the proposed expansion plans into Malaysia and Asean.

Pursuant to Paragraph 10.08 of the Main LR, the Proposed Acquisition of DPSB is deemed a related party transaction due to the interest of the Interested Directors and Interested Major Shareholders as set out in Section 9 of Part A of this circular. Accordingly, DWA Advisory has been appointed as the Independent Adviser to advise the non-interested directors and noninterested shareholders of LHIB in relation to the Proposed Acquisition of DPSB.

One advantage of investing in small and medium enterprises through Bursa Malaysia???s new Leading Entrepreneur Accelerator Platform (LEAP) Market is the structure and regulatory oversight it provides, some LEAP advisers say. They point out that the disclosure rules and vetting by the authorities provide better protection for shareholders.

???The LEAP Market is a good platform for sophisticated investors compared with other alternative investment vehicles because it provides an infrastructure for regulatory oversight and allows for transparency in corporate reporting via Bursa Malaysia announcements. These investor-friendly features are generally absent or dependent on investment managers on other alternative investment platforms,??? says Datuk Roslan Tik, executive director and head of group investment banking and Islamic banking at Kenanga Investment Bank Bhd, one of the approved advisers for LEAP.

The market was officially launched by the prime minister in late July. It is aimed at helping SMEs gain capital exposure and visibility to eventually graduate to the ACE or Main Market.

For companies to maintain their listing on the LEAP Market, they must abide by Bursa???s requirements. Only sophisticated investors can trade on the market. They must disclose the necessary information and documents to brokers to gain qualification before trading on the market.

DWA Advisory Sdn Bhd, another approved LEAP adviser, agrees that the transparency demanded by the regulator will protect investors, especially when compared with pre-initial public offering placements, which also target sophisticated investors and are used by companies before listing on a stock exchange.

DWA Advisory managing principal Datuk Wan Asmadi Wan Ahmad says he hopes sophisticated investors, including fund managers and government-linked investment companies (GLICs), who previously chose to put their money in pre-IPO companies, would consider the LEAP Market.

???Fund managers and GLICs do not have a general or blanket mandate for investments in such companies as they have for mainboard listing. But we are hoping that eventually, they will see this as a pre-IPO for ACE or Main Market listing so that they come into LEAP as if these are the companies they have been investing in previously. We hope the GLICs and fund managers will have some allocation for such asset classes,??? says Wan Asmadi.

According to Bursa, there are currently 11 companies that have engaged approved advisers to help them list on the LEAP Market. Sophisticated investors who are interested in obtaining more information are encouraged to reach out to the companies through their advisers.

Investment risks still present

Despite the regulatory oversight and reporting requirements, the LEAP Market still has lower entry and reporting demands than the ACE and Main Market. For example, a company looking to list on the LEAP Market is not required to have an independent audit committee or independent board of directors. And after a company has been listed, it needs to submit financial statements semi-annually and audited financial statement annually.

The reasoning for the light touch is that the market only caters for sophisticated investors, who are expected to have a deeper understanding of the industries and companies they are investing in. ???The risk of investing in a LEAP company is similar to the risk of investing in alternative investment products, such as private equity funds. Investors should understand the business of the company they are investing in and be able to form a view of the prospects of the business,??? says Roslan.

???More importantly, they should understand that these are small and medium enterprises. Thus, the business risk associated with such companies is typically higher than that of large companies. They should not rely solely on the authorities or advisers to ensure that their investment is successful.???

He says investors should be seasoned and have a diversified portfolio of more mature asset classes. Any investment through the LEAP Market should be seen as a higher-risk one with potentially greater returns.

The potential risks and restrictions imposed on investors, however, narrow the pool of potential funders as they may be drawn to more flexible platforms. ???It is aimed at sophisticated investors, who are mainly private investors who understand the business, operation and risk profile of the LEAP Market candidates. Personally, I don???t think it is an easy task to find such investors,??? says Farid Rahman, senior principal at DWA Advisory.

One risk of having only a small pool of investors is the lack of liquidity in the market. Robert Foo, founder and managing director of financial planning firm MyFP Services Sdn Bhd, says he would advise clients not to invest in the LEAP Market yet as he does not foresee much interest in it.

Many sophisticated investors may prefer going through other channels, such as venture capitalists, to invest in these companies so they don???t have to disclose their net worth and go through the formalities. ???If you want to sell your shares on the LEAP Market, how many sophisticated investors will buy them from you? The market is limited; it is limiting the number of people who can get in and get out. If you want to invest in this, I say hold on first, let???s see how it turns out,??? says Foo.

In search of long-term investors

Investors who may benefit from participation in the LEAP Market are the business partners of the listed firms as they not only understand the companies but also seek a long-term relationship.

???The issuers can approach strategic partners, suppliers and customers who fall under the category of sophisticated investors as potential shareholders. These parties understand the applicants??? operations very well and can foresee the potential growth of their businesses. Thus, the strategic investors could be sourced from within the issuer???s business circle,??? says Muhamad Sabberi Badrul Jamil, senior principal at DWA Advisory.

For ProEight Sdn Bhd, an oil and gas equipment manufacturer that intends to list on the LEAP Market, the smaller pool of potential funders is what it is looking for ??? provided that the investors are committed to stay with the company as it grows and seeks a listing on the ACE or Main Market.

The company changed its initial plan to list on the ACE Market because it wanted to attract committed investors at this stage of growth, says ProEight managing director Azhar Zainal Abidin. ???We want a serious investor who understands what the company is doing and can assist it. For the LEAP programme, the role of the investor is to help the company grow in the right direction so it can benefit when the company lists on the ACE or Main Market. The LEAP Market allows us to have a selection of sophisticated investors that will be there not for the dividend, but for the long haul.???