Small IPOs to ‘mushroom’

This follows a general delay in IPOs during the March to May period due to MCO, says Affin Hwang Yip

by SHAZNI ONG/ pic credit: reservoirlink.com

MORE small IPOs are expected to “mushroom” in the coming months, despite concerns over the challenging and uncertain business operating environment.

This follows a general delay in IPOs during the March to May period due to Malaysia’s Movement Control Order (MCO), Affin Hwang Capital deputy group MD Yip Kit Weng said.

“We see a revival of listings in the past one to two months mainly of smaller companies seeking funds but larger IPOs remain a question mark given the current Covid-19 situation,” he told The Malaysian Reserve.

The investment bank is underwriting the listing of Optimax Holdings Bhd.

Upstream oil and gas (O&G) player Reservoir Link Energy Bhd became the first company to list on the local bourse since the MCO began on March 18, when its IPO took place last week.

It debuted on the ACE Market of Bursa Malaysia on July 15 at 72 sen, or 75.61% or 31 sen premium over its offer price of 41 sen. The stock later closed its maiden trading day at 51.5 sen or a premium of 10.5 sen.

Yip said there is no perfect time for a company to go public, as it depends mainly on the process. “Most companies would like to list in an active and bullish environment but it all depends on market conditions which no one can control.

“Companies that are currently seeking to list on Bursa Malaysia Securities Bhd are generally growth companies that are relatively small in nature. They will proceed to list irrespective of the state of the capital markets,” he said.

The Malaysian equity market has seen increased liquidity driven by an increase in retail participation.

“In previous years, retail participation is around the range of 25%, but this has recently spiked up to 30% and 40%. Due to the low interest rates and a high liquidity environment, we might see this trend continue moving upwards but we’re not sure how long this will sustain,” Yip said.

According to Bursa Malaysia data as of July 20, three IPOs are tentatively scheduled to take place this month.

Ocean Vantage Holdings Bhd is expected to be listed tomorrow, while TCS Group Holdings Bhd will debut on Thursday.

Both firms are headed for the ACE Market, which generally houses start-ups and businesses seeking more capital, and has more relaxed listing requirements compared to the Main Market of Bursa Malaysia.

Premium jewellery brand Aurora Italia International Bhd is expected to be listed this Friday on the Leading Entrepreneur Accelerator Platform (LEAP).

The LEAP Market is open only to accredited investors, high net-worth entities and high net-worth individuals.

In March this year, Ernst & Young’s “Global IPO trends: Q1 2020” report showed Malaysia ranked second in Asia Pacific with six IPOs in the first quarter of the year.

Indonesia came first with 18, followed by Singapore and Thailand with five and two respectively.