Tech sector IPOs can command high valuation

In the last few years, only selected industries can command above average valuation, which are sectors related to technology, says analyst


THE number of IPOs on Bursa Malaysia are expected to be increased this year, but valuation are expected to remain a challenge for the companies.

An analyst who declined to be named said only IPOs from the technology sector can command high valuation despite the difficult market conditions.

“In the last few years, only selected industries can command above average valuation, which are sectors related to technology. For example, the renewable and solar energies sector.

“The valuation for the traditional sector has not been good because the market has been flat for almost three years now. Some companies have to moderate down their expectations in their listing move because they have spent so much time already,” the analyst told The Malaysian Reserve (TMR).

He added that Bursa Malaysia’s target of 40 IPOs this year is achievable, contributed mainly by the (Leading Entrepreneur Accelerator Platform) LEAP and ACE Market listings.

Last year, Bursa Malaysia saw 30 IPOs, the highest figure since 2006.

The LEAP Market contributed bulk of the IPOs with 15 listings (11 in 2018), ACE Market had 11 new listings (nine in 2018) and the Main Market had four IPOs (two in 2018).

In January this year, the companies listed are Supergenics Bhd, Ace Innovate Asia Bhd and Powerwell Holdings Bhd.

Innature Bhd is expected to be listed on Feb 20, 2020.

Rakuten Trade Sdn Bhd research VP Vincent Lau concurred that valuations for new IPOs need to match with the current demand.

“Companies need to be more realistic with the current market conditions. If the valuation is too high, then it might not be too well received.

“Tech-related stocks maybe can post higher valuation. As we can see, the tech counters continue to grow in the current market,” he said.

TMR previously reported Bursa Malaysia CEO Datuk Muhamad Umar Swift saying the stock-exchange operator is anticipating 40 IPOs for the financial year 2020.

“At this point, we have 16 companies across all three markets. But, we are quite confident we will have 40 listings, bearing in mind we already did three listings this year.

“At the moment, we are looking at three listings for the Main Market, 10 for ACE Market and three for LEAP Market,” he said at a recent press conference.

Muhammad Umar added that the energy, construction and technology sectoral indices performed positively last year, growing by 51%, 34% and 29% respectively.

He also said retail participation in the local bourse was at 24.5% last year, a record high in the last five years.