While the numbers may have dropped, there was certainly no lack of excitement in Malaysia’s initial public offering (IPO) scene for the past year. It was not a unique event to the country either as IPO activity picked up globally with listings from China taking the spotlight.

It was a year that not only saw the first China companies choosing to make Bursa Malaysia their home, but it also marked the return of the telecommunications sector’s prodigal son, Maxis Bhd.

Also, the unification of the Main and Second Boards to form simply the Main Market, as well as the revamp of the Mesdaq into the ACE Market, was yet another dimension to a year of changes.

However, with the cloud of uncertainty still shrouding the market, none of the IPOs was able to sustain an upward trajectory as the year wound to a close. More notable is the fact that this is the first time this has happened in the past five years.

In total, as at time of writing, 13 companies had been successfully listed with only one more to go, namely, Yoong Onn Corp Bhd, which is due to list on Dec 23 on the Main Market.

Of those that have listed, 11 are on the Main Market while two are on the ACE Market. One company, Handal Resources Bhd, also holds the distinction of being the last company listed on the Second Board before the merger came about in August.

According to Bursa Malaysia Bhd’s CEO Datuk Yusli Mohamed Yusoff, despite the drop in numbers, the interest was there.
“In any given year, if market conditions are not adverse, we expect to see between 30 and 40 IPOs. This year has seen a decline in the number of listings but this is not peculiar to Bursa alone, as other markets share a similar experience,” says Yusli.

This is also apparent from the fact that unlike last year, all of the IPOs were oversubscribed and the majority managed to close above their issue price on their first trading day.

“On the whole it was impossible to paint a broad brush as to how the IPOs performed this year, as it was very much company-specific,” says OSK Research head Chris Eng.

Given the depressed market conditions at the start of the year, it was no surprise that the first IPO for 2009 only came in June. However, it was the maiden listing of China-based Xingquan International Sports Holdings Ltd and Multi Sports Holdings Bhd a couple of months later that provided the first spark.

Even so, it was not all roses for Xingquan despite being the first China IPO at the Bursa. After a roaring start, the company’s share price dropped so drastically that underwriter CIMB Investment Bank was forced to exercise a “green shoe” option and price stabilisation mechanism.

And after the mechanisms were removed, Xingquan’s share price still continued to drop, which provided ammunition to critics who said that less-than-stellar companies were being allowed to list.

However, almost all will agree that the real fire came when Maxis relisted in November. Not only was it the largest IPO in the country, raising some RM10.7 billion, it also bore the distinction of being the largest in Southeast Asia. In terms of share price performance, Maxis was also the counter that fell the least from its listing day close, declining 0.74% from RM5.42 on Nov 19 to RM5.38 on Dec 16.

“The book building attracted a large number of foreign funds despite its expensive valuations, and they bought Maxis because it was clearly going to be a component stock. To be fair to Maxis, its shareholders got a nice surprise when the company declared a dividend earlier than expected,” says an analyst.

While no listing in 2010 is expected to equal Maxis, excitement is already starting to build for one particular IPO, namely, that of hard disk drive components manufacturer JCY International Bhd.

The listing of JCY, which is said to be backed by private businessman Yong Yoon Kiong, has actually been bandied about before but it wasn’t a sure thing until this year. In a preliminary prospectus posted on the Securities Commission (SC) website, JCY will offer 530.21 million shares in an offer for sale. While the price has not been determined yet, the amount raised could come close to RM1 billion, according to reports.

Other potential listings that could make an appearance in the coming year include Felda Global Ventures Holdings Bhd and UMW Holdings Bhd’s oil and gas unit.

According to the SC’s third-quarter scorecard, two IPOs have been approved for the Main Board, while one has been withdrawn or returned, while the ACE Market saw one withdrawal. This was, of course, lower compared to the same quarter the previous year when 11 companies had been given approval.

“Next year we are expecting to see more China companies seeking listing, but it will be more of the non-consumer manufacturing kind. This will include companies that are food-related, which should generate some interest,” says Eng.

While Yusli does not offer an outlook as to how the IPO scene for 2010 will go, he says: “We certainly see sustained interest by prospective companies seeking to raise funds efficiently in our capital market despite the financial crisis. However, the cautious mood still prevails and as far as we are concerned, we will continue to focus on quality issues.”

In addition to China, Yusli says other countries that have shown interest in Bursa include other Asian countries as well as those from the Middle East.

“However, it may take some time for this interest to be converted to listings as the support system in the foreign jurisdiction must be facilitative to allow for offshore capital raising. We will continue to work closely with investment banks that are the main intermediaries in driving deal flows to Bursa on listings,” says Yusli.

He adds that the new unified boards, coupled with the government’s liberalisation steps, actually managed to increase interest from local companies that were considering listing overseas.

“The restructuring of the fundraising framework on Bursa was done to make it easier and more efficient for access to capital. We believe the enhanced listing requirements will bring with it more opportunities, especially when market recovery comes.

We look forward to this new framework attracting more companies to list, but this will depend on market conditions and when the issuers prefer to list,” says Yusli.

It was definitely a year for the record books when it came to IPOs, and the trick now is whether the momentum can be sustained going into the next decade.



This article appeared in Capital page of The Edge Malaysia, Issue 787, Dec 28, 2009 - Jan 10, 2010.