Bursa says IPO pipeline healthier post-MCO

The exchange operator starts to see an increase in IPO activity following the gradual easing of the MCO with 5 companies confirmed to be listed


BURSA Malaysia Bhd is confident of welcoming more listings by the end of the year given the pipeline of submissions, particularly from small and medium-sized companies and exchange-traded funds (ETFs).

The exchange operator said key factor contributing to the rise in IPO activities of late is the need for companies to raise funds for growth and recovery, and the current favourable stock market conditions.

“The Covid-19 pandemic had caused a slowdown in IPO activity across the globe. However, we are starting to see an increase in IPO activity following the gradual easing of the Movement Control Order (MCO), with five companies confirmed to be listed on the ACE and LEAP Markets in July and August,” the exchange operator stated in an email response to The Malaysian Reserve.

The low-interest rate environment in the country has attracted retail funds into the market with trading volumes hitting new records on Bursa Securities.

A fresh record total of 13.13 billion securities were traded yesterday on the local stock exchange valued at RM8.24 billion.

Pre-MCO, the exchange attracted InNature Bhd, Polydamic Group Bhd, Cosmo Technology International Bhd and ACO Group Bhd to list and the recent listing were Ocean Vantage Holdings Bhd, Reservoir Link Bhd and TCS Group Holdings Bhd.

In the pipeline are Aurora Italia International Bhd, Redplanet Bhd, Optimax Holdings Bhd and Aneka Jaringan Holdings Bhd.

Bursa observed its IPO pipeline across all three markets remains healthy, particularly in the ACE and LEAP Markets, with several IPO applications approved but pending listing.

The Covid-19 pandemic and the MCO had resulted in uncertainties. This has led to several IPO applicants delaying plans for listing the company stated.

“Some companies that were preparing for listing were not able to complete the preparation work due to the MCO. Although we are confident interest from companies to list remains strong, we expect some potential issuers to defer their listing plan for the time being,” it said.

Nonetheless, Bursa said it undertakes to process all applications, including IPO applications, in an effective, efficient and timely manner.

Given the current market conditions arising from the Covid-19 pandemic and MCO, there are incentives currently available for IPO applicants to encourage companies to consider listing as a cost-effective and viable fundraising platform it said.

This includes the waiver of all listing-related fees for 12 months to companies seeking a listing on the ACE and LEAP Markets, and for companies seeking a listing on the Main Market, but have a market capitalisation of less than RM500 million.

Besides that, effective from the year of assessment 2020 until 2022, listings on the ACE Market and LEAP Market are eligible for the tax deduction of up to RM1.5 million on the following listing costs, namely fees to authorities, professional fees, and underwriting, placement and brokerage fees.

Bursa noted that the timing for listing is very much dependent on a company’s future financial plan and projections, and that each company and its sectors in which it operates are unique.

“Companies in sectors that have been resilient or benefitted from the Covid-19 pandemic such as healthcare-related sectors may be able to derive a better valuation for their businesses during this period,” it said.

Bursa expects the number of listed ETFs on Bursa Malaysia to continue expanding as it attracts more participants from institutional to retail investors moving forward.

ETFs listed on Bursa Malaysia offers a wide range of investment exposures ranging from both local and foreign underlying securities, as well as commodities. The offerings provide investors with different returns against the risk profile and for different market cycles.

“The ETF market in Malaysia saw huge growth with the number of listed ETFs on the exchange doubled to 19 following the issuance of 10 new ETFs since last year, of which also led to the doubling of trading activities for the period.

“The variety of underlying securities and style investing of the current 19 listed ETFs will give more options for investors to choose depending on their risk appetite,” it said.

As of June 30, 2020, three best performing ETFs listed on the Exchange are TradePlus Shariah Gold Tracker with a year-on-year (YoY) return of 29%, TradePlus S&P New China Tracker with a YoY return of 24%, and MyETF MSCI Malaysia Islamic Dividend with a YoY return of 17%.