PETALING JAYA: There is a strong influx of initial public offerings (IPO) on the ACE Market this year compared with pre-Covid levels, driven by flexible requirements to get on board, a new Bursa Malaysia regulatory regime and the improving economic situation.
Year to date, 16 companies have been listed on the ACE Market, compared with 11 in 2021 and 10 in 2020. The ACE Market listings make up the bulk of the IPO on Bursa Malaysia Securities compared with the Main Market (three) and the LEAP market (four) so far.
Alliance Islamic Bank CEO Rizal Il-Ehzan Fadil Azim said Bursa Malaysia, which aims to complete close to 40 IPO in 2022, has so far achieved nearly two-thirds of its target.
“At present, there is a strong momentum of companies being listed on the Main, ACE and LEAP Markets. This is especially true for the ACE Market as the number of companies listed so far this year has exceeded the pre-pandemic year of 2019.
“We expect most IPO to be on the ACE Market because flexible requirements for ACE Market listings entice emerging small and mid-cap companies to explore this fundraising avenue. There is a more streamlined regulatory framework that enables greater listing efficiency.
“Recall that effective Jan 1, 2022, Bursa Malaysia became the sole approving authority for IPO on the ACE Market. Under the new regulatory regime, Bursa is now a one-stop centre for all ACE Market IPO approvals; (and) the improving economic situation helps as well,” Rizal told SunBiz.
Companies that were listed on the ACE Market recently include Unique Fire Holdings Bhd, UMediC Group Bhd, Ecoscience International Bhd, Infoline Tec Group Bhd, YX Precious Metals Bhd, and SFP Tech Holdings Bhd, among others.
Rizal also cited other contributing factors, such as increasing global demand in the electrical and electronics industry and the US-China trade war which have led some tech companies to expand or move their operations to Asean countries. He observed that local companies are using the opportunity to raise funds on Bursa for business expansion.
“Due to the surge in global demand for digital solutions, technology and electronics companies (including those serving the semiconductor industry) are delivering stellar performances. In addition, the trade war between the US and China has resulted in some technology companies moving their operations or setting up new operations in Asean nations, including Malaysia. The companies are taking the opportunity to raise funds in the capital market to expand their businesses.
“Companies in the renewable energy sector may also be drawn to the capital market to raise funding for the various renewable energy projects awarded by the government.
“Those in the other sectors such as manufacturing, healthcare, trading, logistics, and F&B (food and beverage) are expected to continue performing well in a post-Covid environment. The reopening of the economy and the rebound in economic activities bode well for the revenue and profit prospects of many industries moving forward,” Rizal said.
He opined that liquidity remains ample in the capital market, due to the sustained accommodative interest rate environment. The health of the local capital market is also underpinned by the strong participation of retail investors.
On outlook, Rizal expects stronger gross domestic product growth of 5.9% this year on the back of strong domestic demand, easing of Covid-19 restrictions, and the reopening of international borders. As economic activities accelerate, businesses will be more certain about their funding requirements for expansion.
Additionally, he pointed out that among the key benefits of companies listing is the elevation of their profile and market standing. Moreover, a company that goes public has ready access to the capital market to funds raised for expansion and other projects.
“IPO also helps to unlock the value of early investors’ shareholdings in the company. Listed companies also commonly use employee share ownership schemes to attract, motivate and retain talent.”
Rizal stated that the presence of more exciting small- and mid-cap ACE companies can help boost the vibrancy of the local market. Investors will also have the opportunity to dabble in the stocks of emerging companies with high-growth prospects. He continues to see opportunities for IPO in the small-mid cap arena in view of the booming SME segment in Malaysia.
Meanwhile, M&A Securities Sdn Bhd corporate finance managing director Datuk Bill Tan also sees an increase of IPO this year in contrast to 2021 and pre-pandemic years, due to the booming market which encourages a significant number of companies to list in order to raise funds from the equity market.
“Yes, the number of companies going for listing this year is definitely higher than last year and pre-Covid. During the pandemic, a lot of companies especially from the healthcare, semiconductor and IT related business experienced a surge in demand for their products and services, that is why a lot of companies choose to list their companies to raise funds to expand their business,” he said.
Since the pandemic, he added, there were quite a numbers of companies with good business models listed on Bursa Securities. These companies will definitely add value to the stock exchange. He also observes a lot of submissions for IPO in the second half of 2022.
“Our stock market has taken a beating due to the ongoing trade war, Russia-Ukraine war and hike in interest rates. Hence, there will be a lot of challenges and headwinds in the second half of 2022,” Tan said.