Is Bursa cooling off after election fever?


From being regarded as one of the most vibrant stock exchanges in the region — having attracted globally-awaited initial public offerings (IPOs) — Bursa Malaysia Securities Bhd did not seem to create that much wave lately, with only two new listings on its Main Board this year.

This marks the lowest new Main Board listings in the history of Bursa Malaysia since its inception in 1973.

In simple words, 2018 could easily be the worst year for the local IPO market in the last 45 years.

While the first five months of 2018 only witnessed listings on the secondary board, only two companies made it to the Main Market, each in June and December.

The total proceeds raised from IPOs of 22 new listings this year were RM626.6 million — inclusive of the ACE Market and Leading Entrepreneur Accelerator Platform (LEAP) Market.

While it is a far cry from the amount raised in the last four decades, the two listings on the Main Board contributed some RM421.34 million.

Analysts reckoned that in the first half of the year (1H18), the slowdown was primarily driven by a “wait- and-see” approach, as a result of a combination of external and domestic uncertainties arising from the US-China trade war, as well as the 14th General Election (GE14).

After the Polls

Pakatan Harapan’s victory in GE14 somehow did not move the market as anticipated.

The policy direction of the new Pakatan Harapan government somehow prolonged the wait-and-see attitude in the market.

There was anticipation of potential renaissance in IPOs during the 2H18, but there seemed to be no uptake in the corporate scene.

It has remained clouded with the listing scene continues to be stagnant as the market approaches the final two weeks of 2018.

The Abyss of Malaysia’s IPO

In 2012, Bursa Malaysia was the centre of attraction with global investment banks scrambling to take up slices of enormous mega IPOs that were dished out.

During that year, listings of Felda Global Ventures Holdings Bhd, IHH Healthcare Bhd and Astro Malaysia Holdings Bhd raised a total proceeds of RM20.8 billion.

The three companies also gained the distinction of being ranked among the top 10 IPOs globally for 2012.

According to Bursa Malaysia’s annual reports, RM600 million was raised from 11 IPOs in 2016; RM4.14 billion from 11 IPOs in 2015; RM5.9 billion from 14 IPOs in 2014; RM8.2 billion from 18 IPOs in 2013; and almost RM23 billion from 17 IPOs in 2012.

Reports also show that RM6.7 billion was raised from 28 IPOs in 2011, RM19.87 billion from 29 IPOs in 2010 and RM12.04 billion from 14 IPOs in 2009.

A check on Bursa Malaysia’s website revealed that in 1996, the local bourse hosted the most new listings on the Main Board with a total of 40 companies.

Before 2009, Bursa Malaysia was made up of the Main Market, ACE Market and the Malaysian Exchange of Securities Dealing and Automated Quotation.

To date, there are a total of 913 companies listed on Bursa Malaysia, from which 782 were listed on the Main Market, 120 on the ACE Market and remaining 11 on the LEAP market.

2018 IPO Stars

The best IPO this year was via a semiconductor-related company Mi Equipment Holdings Bhd, which was the first of the two Main Market listings.

Listed in June, the local equipment manufacturer managed to raise RM190.87 million despite the volatile market.

The best performing stock from this year’s listing in terms of market capitalisation is Revenue Group Bhd.

The cashless payment solutions provider, that was listed on the ACE Market on July 18, has a current market cap of RM298.61 million, a 114% increase from its first day’s closing market value of RM139.28 million.

Revenue’s share price has increased by 264.86% to RM1.35 per unit, over its listing price of 37 sen on its debut day on July 17, 2018.

Bloomberg data shows that Revenue is currently trading at 38 times its estimated earnings per share for the coming year.

Neighbouring IPO

Regionally, Malaysia seems to be nowhere close compared to its neighbouring countries that are reaching new highs in terms of number of listings on their local stock market.

Indonesia has, for the first time, surpassed Singapore in terms of both volume and value of IPOs in South-East Asia, according to a report by Duff & Phelps LLC.

Public listings in Singapore hit a five-year low with 15 companies raising a total of about U$523 million in 2018, while Indonesia recorded a new high by raising a total of US$1.1 billion (RM4.62 billion) from 57 listings during the year.

Singapore was among the most preferred destinations for listings in South-East Asia until last year.

This year, Singapore is seen to be catching up with other regional markets like Indonesia, or its long-standing competitor, Hong Kong, the report said.

Note that Malaysia has outperformed Singapore in IPO volumes in recent years, excluding real estate investment trusts (REITs) and business trusts.

Bloomberg data show that between 2014 and 2017, Malaysian IPO proceeds, excluding the two aforementioned categories, have beaten Singapore by a healthy margin.

Malaysian IPOs raised US$1.66 billion in 2017 compared to US$402 million from Singapore.

Among the top IPO deals recorded in 2018 in the region was the public listing of Singapore’s Sasseur REIT.

The IPO was launched in March 2018 and priced at S$0.80 (RM2.43) per unit comprising 252.8 million placement units and a public tranche of 13.8 million units.

The company raised a total of US$300 million through the offering.

Of the top 10 slots in terms of total capital raised regionally, eight were occupied by Indonesian companies.

Hong Kong, on the other hand, is on course to take the global IPO crown this year for the most money raised in stock market flotations, narrowly ahead of arch-rival New York.

Eighty-four companies raised US$28.6 billion through IPOs on Hong Kong Exchanges and Clearing’s Ltd (HKEx) Main Board in the first nine months of the year, up 220% from the US$8.93 billion raised a year earlier.

New York, the top IPO market worldwide since the first quarter of 2017, dropped to the second place as 48 companies raised US$25.1 billion during the first nine months.

Nasdaq ranked third at US$18 billion while Shanghai took the fourth place at US$10.44 billion.

According to Reuters, the driving force behind the HKEx’s IPO boom was the listing reform in April, which attracted three big technology blockbusters from July to September.

The local bourse, which implemented its biggest listing reform in 25 years in April, allowing companies with dual shareholding structures, new economy as well as the biotech firms without profit or revenue to list here, attracted two mega dual-class shareholding structure companies.

Smartphone maker Xiaomi Corp launched its US$5.4 billion Hong Kong IPO in July and China’s food delivery service platform Meituan Dianping raised US$4.2 billion this month.

Dual-class shareholding companies allow founders and key management to own shares with more voting rights than other shareholders, which is favoured by many technology and new economy companies.

The city was leading the IPO market worldwide from 2009 to 2011, as well as in 2015 and 2016.