This article first appeared in Capital, The Edge Malaysia Weekly on December 28, 2020 - January 3, 2021
THE 18 initial public offerings (IPOs) on Bursa Malaysia this year may be 12 entries shy of the 30 recorded in 2019, but these debutants have shown that even an unprecedented event such as the Covid-19 pandemic could not deter them from their listing plans.
The ACE Market saw the highest number of listings with 10, followed by the LEAP Market with six and the Main Market, two. It is worth noting that the IPO of Main Market-listed Mr DIY Group (M) Bhd — with its RM10 billion market capitalisation and RM1.5 billion of proceeds raised from institutional and retail investors — was the largest since that of Lotte Chemical Titan Holding Bhd, which raised RM3.77 billion on its debut in July 2017.
The only other company that listed on the Main Market this year was cosmetics and personal care retailer InNature Bhd, which opened on Feb 20 at 72 sen a share — eight sen, or 12.5%, higher than its IPO price of 64 sen.
Seven companies were listed between Jan 6 and March 19, while the rest of the IPOs took place from July after the government relaxed its movement restrictions.
A total of RM2.01 billion was raised from the 18 IPOs this year — 2% higher than the RM1.97 billion raised from the 30 listings in 2019.
The decrease in the number of listings on the LEAP Market to six this year from 15 in 2019 is a telling sign that the delay in the rolling-out of a transfer framework — for players that want to migrate to the ACE Market — has become a deterrent to small and medium enterprises looking to list on the adviser-driven market. Another reason is the LEAP Market’s lack of liquidity.
M&A Securities Sdn Bhd managing director Datuk Bill Tan explains, however, that the LEAP Market, despite these issues, remains a fitting platform for businesses to raise funds from investors they know. “Without LEAP, it would be hard for these companies to attract these investors at all,” he quips.
Tan observes that the risk appetite of retail investors this year has been stronger than that of institutional investors, indicating “good retail participation and market vibrancy that will continue into 2021”.
Busy IPO pipeline for 2021
“The IPO pipeline for next year onwards is the most active I have ever seen. That is surprising and incredible, as [the Main Market] has not had this level of activity since the 2010-to-2012 period,” says Ramesh Manimekalanandan, managing director and head of regional equity capital markets at Maybank Investment Bank Bhd, which handles only Main Market listings.
Companies intending to launch their IPO in 2021 have been encouraged by their strong third-quarter results, attesting to their resilience even when faced with limitations imposed by the pandemic and lockdowns, he explains.
“The companies looking to list are planning to raise about RM500 million, to RM2 billion to RM3 billion. These are not multibillion-dollar deals but companies that have gained confidence after seeing their businesses perform during the height of the pandemic and recover after,” says Manimekalanandan.
There are at least five potential IPOs to look out for in 2021, including that of local glove maker Harps Holdings Sdn Bhd. Sources say if it debuts on Bursa, possibly in the first half of next year, it would spur other beneficiaries of the pandemic to list early as well.
The rest include credit reporting agency CTOS Data Systems Sdn Bhd, Smart Glove Corp Sdn Bhd and Affin Hwang Asset Management Bhd — a 63%-owned unit of Affin Bank Bhd — which are expected to raise US$150 million, US$242 million and RM500 million respectively.
Apart from a few healthcare and consumer companies that have submitted their request for proposal to banks to kick-start the selection process for a listing, there is also the anticipated IPO of Johor-based property developer Iskandar Waterfront Holdings Sdn Bhd. It plans to list in the first half of 2021 to raise at least RM5 billion.
Only time will tell whether these listings will materialise. For now, this much is clear: Businesses have generated enough momentum to hit the ground running in the new year.
Global IPO markets finish strong
DESPITE the turbulent year of Covid-19 and political, social and economic concerns, global IPO markets are expected to conclude 2020 on a strong footing, with an increase of more than 23% in proceeds compared with last year.
Recovering from a slower first half of the year, the improved overall performance is attributable to a surge in fundraising in the stock exchanges of Mainland China and Hong Kong, which are set to record the highest proceeds since 2011, according to a Dec 6 report by KPMG.
Among the top-performing bourses in 2020, Nasdaq tops the list with IPO proceeds of US$53.5 billion (RM217 billion). The Stock Exchange of Hong Kong and the Shanghai Stock Exchange follow closely behind, raising US$50.3 billion and U$49.9 billion respectively.
A few global IPOs enlivened the scene recently.
Airbnb Inc’s long-awaited IPO on Dec 9 was the biggest since the pandemic forced a shutdown of global economies earlier this year. The peer-to-peer room and home rental company sold its shares at US$68 apiece, above its targeted price range of US$50 to US$40 per share, to raise around US$3.5 billion on Nasdaq. The near doubling of its share price to US$124.80 on Dec 15 raised the company’s valuation to about US$75 billion, which is higher than the Marriot and Hilton hotel chains combined.
Airbnb’s IPO came just hours after DoorDash Inc almost doubled to close at US$189.51 from its listing price of US$102 apiece in its debut trading session on the New York Stock Exchange on Dec 9. That gave the food delivery app a market valuation of around US$60.2 billion, more than double the US$16 billion it was deemed worth during a private funding round in June.
The San Francisco-based firm, which competes with GrubHub and Uber Eats, raised US$3.4 billion in a market with an appetite for emerging tech sector firms catering for pandemic lifestyle shifts to give the fast-growing firm a valuation of US$39 billion at its opening.
Then there was Ant Group’s thwarted Shanghai-Hong Kong dual listing earlier this month. The internet finance giant would have raised over US$34.4 billion at a US$313 billion valuation, but Beijing forced the Chinese fintech giant to pull the plug just before its scheduled listing. While Chinese officials said the company did not meet certain regulatory and disclosure requirements for its IPO, it would appear that a speech by Jack Ma, criticising regulators about their policies, may have had more to do with it.
Moving forward, a key question is whether these emerging firms — or unicorns, as these billion-dollar IPOs promising high growth and returns are called — will do well. At any rate, the spotlight will be on tech stocks in the coming months.
Meanwhile, a Deloitte report on the year’s IPO trends in Southeast Asia found that around US$6.44 billion had been raised from 100 IPOs across the region. The report sees Thailand as the strongest finisher in the SEA IPO market in 2020, having raised about US$3.94 billion (exceeding last year’s US$3 billion) from 23 IPOs since the start of the year until Nov 15.
Looking ahead, KPMG is confident of the Hong Kong IPO market maintaining its position as a top listing destination in 2021, given the growing interest from issuers and investors for homecoming listings.
“This is evidenced by nine US-listed Chinese companies that have completed [their] secondary listings in Hong Kong this year,” the report explains.
In addition, China’s central government is deepening mutual access between the mainland and Hong Kong markets, a move that will lead to more pre-profit biotechnology companies listed in Hong Kong and stocks listed on the STAR Market being eligible for listing under the Stock Connect, a collaboration between the Hong Kong, Shanghai and Shenzhen stock exchanges.
KPMG adds that Hong Kong’s status as an international financial centre is something to note as the trend of homecoming and biotech listings will further stimulate a change in the composition of its market. Investors will see the traditional base of real estate and financial services make way for a base of new economy listings such as technology, biotech and e-commerce.
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