High-risk investors likely to invest in LEAP on restrictions

Participants for the LEAP Market are limited to selected categories

by RAHIMI YUNUS / pic by TMR filepic

Restrictions to selected investors and the small liquidity size would limit participants of the newly introduced Leading Entrepreneur Accelerator Platform (LEAP) Market to boutique and smaller investment houses.

The youngest market on the Bursa Malaysia saw its first listing on Tuesday. But it does not offer the liquidity prospect like the Main and ACE Markets that excite institutional funds, said analysts.

The market aims to help specialised small and medium entreprises (SMEs) to gain capital from the equity market. But the participants for the market are limited to selected categories.

Only sophisticated investors — high-net-worth entities or individuals with total net assets above RM10 million, or RM3 million respectively — are allowed to invest in companies listed on the LEAP Market.

Affin Hwang Investment Bank Bhd senior director and head of equity capital markets Arvin Chia Yew Kim said: “Since the market is restricted to sophisticated investors, the pool of capital would not be huge compared to ACE or Main Markets.”

He said the liquidity for LEAP-listed firms are also far from what investors would witness for an initial public offering.

“I don’t think it will reach near the ACE Market anytime soon, or maybe for the next 12 to 24 months,” told The Malaysian Reserve (TMR).

“For now, primarily, those smaller banks, brokerage houses and boutique investment firms would be the key players on the LEAP,” he said.

Singapore-based Cloudaron Group Bhd, a cloud technology solutions provider, became the first company to be listed on LEAP.

A dealer from Kenanga Investment Bank Bhd said that the LEAP Market is like a stepping stone market for companies before they graduate to the ACE or Main Markets.

“In terms of raising fund, I think there is a limited amount that can be raised because the market is restricted to only sophisticated investors. Hence, I don’t think the market would attract much liquidity, the freefloat is small,” the dealer told TMR.

Kenanga is one of the authorised advisors for the LEAP Market. The investment bank is currently assessing more than five companies and the majority of the firms is in the technology business space.

The dealer said investors of LEAP-listed firms will need to “ride together” with the companies for at least two to three years, have a higher risk appetite and are open to investing in smaller high-growth companies.

However, the market applauds the move to introduce the LEAP Market.

Chia said the LEAP Market is more than just about capital appreciation or market liquidity.

“I think it is a good platform for SMEs to be listed on the market and to give them fair valuations. Otherwise, it would not be known if they are not listed,” he said, adding that the companies would also enjoy higher confidence from their vendors or suppliers due to the listing status.

“The LEAP Market would open avenues for the small companies to not only raise fund, but improve their company profile, raise visibility, credibility and many other intangible benefits that will help them grow faster,” Chia said.

Malaysia is the first country in the region to introduce such market. Thailand and Singapore are expected to follow suit.

Cloudaron saw its shares closed at 17.5 sen, up 6.06%, or one sen on its second day of trading yesterday.