This article first appeared in The Edge Malaysia Weekly on May 27, 2024 - June 2, 2024

ALMOST seven years since Bursa Malaysia introduced the Leading Entrepreneur Accelerator Platform — better known as the LEAP Market — to create an alternative capital-raising platform for small and medium enterprises (SMEs), only two companies have successfully graduated from the board via a transfer to the ACE Market.

There are now 48 companies on the LEAP Market, with a total market capitalisation of RM6.3 billion.

Since 2019, when the LEAP Market recorded the highest number of initial public offerings (IPOs) — 15 companies — the number of firms looking to list on the third board has fallen dramatically.

In 2022, only five companies debuted on the LEAP Market, followed by one company in 2023 while another is seeking to list this year.

This is happening at a time when Bursa Malaysia is seeing a wave of companies vying for listing, with most of them seeking to list on the ACE Market.

There were 24 listings on the ACE Market last year, one less than in 2022, which was the highest number of listings since the market started in 2009. Less than six months into 2024, a total of 12 companies have listed on the ACE Market.

Looking at the numbers, why are there so few companies listing on the LEAP market compared to the ACE Market? Why is the LEAP Market not the first choice for SMEs seeking to raise funds via a public listing?

One of the reasons is that the process to move the listing status from the LEAP Market to the ACE Market is perceived to be more tedious.

For perspective, so far only two companies — Cosmos Technology International Bhd (KL:COSMOS) and TT Vision Holdings Bhd (KL:TTVHB) — have graduated from the LEAP Market to the ACE Market. These two made the move prior to the new transfer framework introduced in April last year, whereby they had to delist their shares from the LEAP Market before submitting an application to be listed on the ACE Market.

Both Cosmos and TT Vision have seen their share prices perform after transferring to the ACE Market.

Up to May 24, Cosmos’ share price had gained 41% since its IPO on the ACE Market back in October 2022, while TT Vision’s counter surged 250% from its IPO on Jan 18, 2023.

Between 2020 and 2022, three companies withdrew their listing from the LEAP Market, namely Polymer Link Holdings Bhd, JM Education Group Bhd and Zenworld Holdings Bhd (formerly known as MyKris International Bhd). They have yet to announce a return to Bursa Malaysia.

In an interview with The Edge in 2020, Polymer Link cited the transition framework as one of the reasons for the company’s withdrawal of its listing.

Meanwhile, JM Education managing director Teh Cheong Hua said the illiquid nature of the LEAP Market was a major concern and that the lack of a straightforward transfer mechanism to the ACE Market was another letdown.

Nonetheless, in April last year, the regulator announced the much-awaited transfer framework for the LEAP Market, whereby companies can apply to transfer to the ACE Market without withdrawing their listing from the LEAP Market. If they fail to obtain approval for a transfer to ACE, they can still continue their listing status in the LEAP Market. Since then, more companies on the LEAP Market have been seeking to transfer their listing to the ACE Market.

Based on data gathered, at least nine have announced plans to migrate to the ACE Market. They consist of: Lim Seong Hai Capital Bhd (KL:LSH), SL Innovation Capital Bhd (KL:SLIC), Steel Hawk Bhd (KL:SKHAWK), Supreme Consolidated Resources Bhd (KL:SUPREME), Metro Healthcare Bhd (KL:MHCARE), Carlo Rino Group Bhd (KL:CRG), Topvision Eye Specialist Bhd (KL:TOPVISN), Fibromat (M) Bhd (KL:FBBHD) and Amlex Holdings Bhd (KL:AMLEX).

Fibromat is the latest company to announce its transfer plan in order to tap into a larger pool of investors for a fundraising exercise.

Liquidity is another issue when it comes to the LEAP Market. It is only accessible by a selective pool of sophisticated investors, leading to lower trading activity and lack of vibrancy. From inception, the LEAP Market has been targeted at sophisticated investors for them to invest in the growth of SMEs.

Interestingly, some of these companies on the LEAP Market have a larger market capitalisation than the ACE Market (see table).

Take Lim Seong Hai Capital, for instance. The company has a market capitalisation of RM622 million, followed by Uni Wall APS Holdings Bhd (KL:UNIWALL) with RM578 million, with both already in the mid-cap category. Nonetheless, trading of these counters is negligible.

“While listings on the LEAP Market have shown promise, challenges such as low trading activity and cost-related issues hinder greater investor participation and SME fundraising,” Securities Commission Malaysia notes in its “Catalysing MSME and MTC Access to the Capital Market: Five-Year Roadmap (2024-2028)” released last Thursday.

In the road map, SC said one of its strategies to revitalise the LEAP Market is to widen the eligible investor class. However, it did not elaborate on this. 

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