This article first appeared in The Edge Malaysia Weekly on December 25, 2023 - December 31, 2023

In a year that saw 22 listings on the ACE Market of Bursa Malaysia, NationGate Holdings Bhd easily stands out because of the incredible gains its share price has made since its initial public offering (IPO) on Jan 12.

From its IPO price of 38 sen a share, the counter had risen 242% as at our cut-off date of Nov 30, making the electronics manufacturing services provider the best-performing of all IPOs listed on Bursa Malaysia this year.

On its maiden day of trading, NationGate opened at 81 sen — a solid premium of 113.2% over its IPO price — and closed the day even higher at RM1 for a premium of 163.2%.

At RM1, its market capitalisation stood at an impressive RM2.07 billion, immediately catapulting it into the billion-ringgit club, compared with RM788.1 million upon its listing — making it the largest IPO on the ACE Market.

Its closing price of RM1.30 on Nov 30 translates into a market value of RM2.7 billion and the counter has continued to move up at the time of writing in mid-December.

This is despite its disappointing financial results for the third quarter of the financial year ending Dec 31, 2023 (FY2023), which saw its net profit almost halve to RM17.28 million from RM30.05 million a year earlier, on the back of a 46% decline in revenue to RM165.58 million. NationGate attributed the lower top and bottom lines to weaker demand, especially from the networking and telecommunications segments.

Despite the weakness in the overall semiconductor sector, analysts expect NationGate to continue to see earnings recovery going into the final quarter of this year. Kenanga Research, in a Nov 15 report, maintained an “outperform” stance for the group and target price of RM1.70 based on an unchanged 25 times FY2024 forecast price-earnings ratio (PER).

“NationGate saw a bottom in the recently reported 3QFY2023 results and is now realigned back onto a path of strong growth trajectory. The group attributed the softer demand for optical transceivers to the relocation of its key customer out from China to Penang,” it said in the report. The research house added that NationGate expects to onboard a new data centre customer, xFusion, in 2Q2024.

From the start, there was strong demand for NationGate’s shares. The public portion of its IPO was oversubscribed by 16.49 times, garnering 20,444 applications seeking 1.81 billion new shares valued at RM689.16 million. However, only 103.70 million new shares were made available for public subscription.

The group raised RM165.5 million from its IPO via the issuance of 435.5 million new shares, of which 63% of the proceeds was meant for the repayment of its bank borrowings while 29.2% was for its working capital requirements.

As at Sept 30, NationGate’s borrowings stood at RM125.56 million from RM317.8 million a year earlier, while its cash position was at RM17.32 million from RM27.39 million previously.

Its net asset per share stood at 19.5 sen, while earnings per share was at 3.85 sen for the first nine months of FY2023.

M&A Securities Sdn Bhd was the adviser, sponsor, underwriter and placement agent for the IPO exercise.

Notable mention

Oppstar Bhd gets a special mention for its sizzling performance on its maiden day of trade on the ACE Market on March 15.

It opened at RM2.05 — a 225.4% premium over its IPO price of 63 sen — and went on to hit an intraday high of RM2.95 before closing at RM2.43 for an impressive premium of 285.7% and a market value of RM1.55 billion. It was the best first-day close among all companies listed this year.

Oppstar became the first integrated circuit (IC) design house and first pure front-end semiconductor player to list in Malaysia. Its first-day performance was impressive considering the widespread volatility among semiconductor and technology indices at the time, in addition to poor capital market conditions globally, owing to recessionary fears and hawkish monetary policies.

At the time, Oppstar was on course to be named the best IPO of 2023. However, the counter has been on a downward trend since its debut amid a weaker global macroeconomic environment, albeit still above its IPO price of 63 sen. As at the Nov 30 cut-off date, the stock had shed 98.4% from its IPO price to RM1.25, giving the company a market capitalisation of RM795.25 million — below the RM1 billion mark.

One of the most-anticipated IPOs of the year given that Oppstar operates in the front-end of the semiconductor supply chain — an area largely dominated by large Western multinational corporations — it was oversubscribed by 77.05 times by the Malaysian public. Of the 31.81 million shares made available to the public, it received 39,103 applications for 2.48 billion shares valued at RM1.56 billion, which Affin Hwang Investment Bhd (AHIB) said was an all-time ACE Market record in terms of public subscription value.

AHIB was the principal adviser, sponsor, sole placement agent and sole underwriter for the IPO exercise. Oppstar raised RM104.25 million from the IPO, which comprised a public issue of 165.48 million new shares.

Oppstar’s revenue stood at RM29.71 million for the first half of the financial year ending March 31, 2024 (1HFY2024). There were no comparable year-ago results given that the company was only listed in March this year. For 2QFY2024, it posted a net profit of RM4 million, a 24.88% decline from RM5.33 million in the preceding quarter, as revenue shrank 10.54% to RM14.03 million.

Kenanga Research said Oppstar’s net profit of RM9.34 million in 1HFY2024 fell short of expectations, accounting for only 33% of its full-year forecast and 32% of the full-year consensus estimate. “The variance against our forecast came largely from a sharper-than-expected decline in contributions from certain turnkey projects at their tail ends,” it added.

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