KUALA LUMPUR (Aug 28): Mercury Securities Group Bhd, which is slated to be listed on the ACE Market of Bursa Malaysia on Sept 19, expects better revenue recognition from the margin financing component of its stockbroking business post listing.
Mercury Securities managing director Chew Sing Guan based its confidence on the margin financing business’ compounded annual growth rate of 36% from financial year 2019 (FY2019) to FY2022.
Margin financing, which loosely means borrowing money from a brokerage company and using that money to buy stocks, is a credit facility given to individuals, public listed companies and corporations to finance the purchase of shares listed on Bursa Malaysia Securities Bhd.
Upon listing, Mercury Securities has allocated RM26.86 million from its total targeted initial public offering (IPO) proceeds of RM39.27 million to expand this business.
The proceeds are based on the issuance of 157.09 million shares at an issue price of 25 sen per share.
“Corporate financing brings in good income, but it's a high cost. With margin financing with the right client, this is probably the best return for our bucks. We know the market, we know ‘who is doing what to who’ which position us in the best place to pick and select the best margin clients.
“We are still lending to small investors. With the IPO proceeds, we will be able to concentrate on the big ticket borrowers,” he said.
He said Mercury Securities is using internally generated funds to give out credit facility, but the IPO proceeds will give greater allocation to expand the provision of margin financing facility to its existing and new stockbroking clients.
He said this in turn will help further enhance revenue for the stockbroking segment via margin income in addition to brokerage fees generated from purchase and sale of quoted securities made by margin clients.
In FY2022, Mercury Securities’ stockbroking business contributed 69.7% to revenue while corporate financing contributed 30.27%.
On the corporate finance segment of the business, Chew said the IPO component is the most profitable part at the moment, adding Mercury Securities is currently engaged with eight more companies to assist them on their listing journey.
“Prospects-wise, time is good, there will be steady income just from IPO exercises. But Mercury Securities also has been involved in the other aspects of financial advisory. Mergers and acquisitions, takeovers and such have come off a little bit. Appetite now is for IPO business,” he added.
In 2022, Mercury Securities facilitated five IPO exercises, of which one was a Main Market debutant, two were listed on the ACE Market and two were bound for the LEAP Market.
He added that the improving economic condition and capital abundance in the market will increase demand for corporate finance advisory services in Malaysia.
Upon its listing on the ACE Market, Mercury Securities will have a market capitalisation of RM223.25 million based on the issue price of 25 sen per share and its enlarged issued share capital of 893 million shares.
In a statement on July 20, Mercury Securities said the IPO comprises a public issuance of 157.1 million new shares — representing 17.59% of the group’s enlarged share base of 893 million shares — as well as an offer for sale of 71.51 million existing shares — representing 8.01% of the enlarged share base — through private placement to selected investors and Bumiputera investors approved by the Ministry of Investment, Trade and Industry.
Of the 157.1 million under the public issue, 44.65 million will be made available to the Malaysian public, while 22.33 million shares will be for the group’s eligible directors, employees and those who have contributed to its success, 45.47 million shares are to be placed out to selected investors and the remaining 44.65 million shares are allocated to Bumiputera investors approved by Miti.
Public Investment Bank Bhd is the principal adviser, sponsor, sole underwriter and sole placement agent for this IPO exercise.