Local IPOs off to a strong start

Eight companies have launched their IPOs so far this year, as firms seek to raise over RM154m in funds


THE local market for IPOs is off to a strong start this year, with at least three stocks debuting at more than a 100% premium over their offer price.

Eight companies have launched their IPOs so far this year, Bursa Malaysia data showed, as companies seek to raise over RM154 million in funds amid a surge in retail stock trading during the pandemic.

MIDF Amanah Investment Bank Bhd VP and head of research Imran Yassin Md Yusof told The Malaysian Reserve that the strong performance of IPOs in the past three to four months indicates there is still vibrancy in the market.

Listings by Mobilia Holdings Bhd, Flexidynamic Holdings Bhd and Volcano Bhd have so far stood out, with the counters registering a premium of 183%, 245% and 100% respectively. However, shares of all three companies have since declined by an average 20% since their debut.

“We are cognisant of the mixed performance of some companies after their debut. It could be due to several factors such as high valuation upon listing and profit-taking. However, we view this as normal and have seen this trend previously.

“It means investors will have to be diligent in choosing the companies they want to invest in. On the flip side, for companies with solid fundamentals, the selloff of its shares could present buying opportunities for investors that missed out on the IPO,” Imran said.

Others like Teladan Setia Group Bhd and UCI Resources Bhd made their debuts by a smaller premium, though the company’s shares have been trading higher, closing 18.4% and 2.7% higher year-to-date last Friday.

The Securities Commission Malaysia is expecting 30 companies to debut on Bursa Malaysia this year, with chairman Datuk Syed Zaid Syed Jaffar Albar describing the IPO projection as a “healthy” figure.

Disruptions caused by the Covid- 19 pandemic last year saw only 19 new listings, including two new companies on the Main Market.

To compare, 2019 saw 30 companies make their debuts consisting of four on the Main Market, 11 on the ACE Market and 15 on the LEAP Market. In 2018, there were 22 IPOs.

“This year, we expect IPOs will continue to be robust given that retail participation in the equity market continues to be high. Based on data from Bursa Malaysia, 39% of total trades this year have come from retail investors,” Imran Yasin said.

Across Asean countries, the first quarter of 2021 (1Q21) saw a total of 23 IPOs raising US$2.4 billion (RM9.9 billion), down from the 32 listings raising US$3 billion over the same period last year, according to a recent Ernst & Young (EY) report.

Thailand’s exchanges raised US$1.6 billion from five IPOs, while Indonesia led in deal numbers with 12 IPOs, EY said. This is followed by Malaysia which had four IPOs and the Philippines and Singapore which each saw one IPO listed during the quarter.

EY Asean IPO leader Max Loh said 1Q is typically a muted period for IPOs in Asean, as companies gear up for capital market activities.

“Cautious optimism prevails with existing uncertainties, providing a cocktail of volatility in the Asia-Pacific IPO markets. Companies will need to be resilient to challenges and prepare early to be successful in their IPO aspirations,” he said.