The ACE Market (previously known as the Mesdaq Market) has gone through a few changes since it was launched 12 years ago. There are over 100 companies listed on Mesdaq but most people may not remember the first 10 to do so.

The most important aspect of  the Mesdaq Market was its premise that high-growth companies needed an avenue to raise capital fast without being impeded by the rules and regulations of traditional financial markets. Thus, investors who wanted to get in on such companies early and ride a higher upside potential were given an opportunity with the creation of the Mesdaq Market.

While it has been a dozen years now since Mesdaq was launched as a key component of the Multimedia Super Corridor environment, netv@lue2.0 thought it would be instructive to look at the first 10 to list on it and discover their journey thus far, and whether they thought it was worth their while.

The companies, in order of listing date, are Supercomal Technologies Bhd, Intelligent Edge Technologies Bhd, Kotra Industries Bhd, Palette Multimedia Bhd, Disccomp Bhd, PUC Founder (MSC) Bhd, Willowglen MSC Bhd, YTL e-Solutions Bhd, Iris Corp Bhd and Brite-Tech Bhd.
Surprisingly, while quite a number of Mesdaq companies have dropped out after listing, the first 10, although not exactly flourishing, are still listed and surviving.

Supercomal, which changed its name to Supercomnet Technologies Bhd this year, was listed on April 10, 1999. It was established by Taiwanese entrepreneurs in 1991 to undertake the business of manufacturing basic electrical wires and cables. The company aims to become a leader in the manufacture of advanced high-technology cables for the IT sector.

According to its managing director Shiue Jong-Zone, the company needed to raise funds to expand its business and develop high-end products. “This happened when the government had proposed to start another listing body called the Mesdaq Market to cater for technology companies,” he says.

“We were planning to go for listing and were approached by business partners [including bumiputeras] and the management of Perbadanan Nasional Bhd. With their participation and assistance, we got the nod from the relevant authorities to list on Mesdaq.”

In terms of financial performance, Supercomal has not fared too well. From a net profit of RM6.38 million in FY1999 ended Dec 31, it plunged into the red with a net loss of RM4.07 million in FY2005. The company did not really recover from this but managed to narrow its losses. For the nine months to Sept 30, 2009, its net loss was RM1.37 million.

After Supercomal, there was a lull until 2000, when Intelligent Edge and Kotra became the next two companies to make their Mesdaq debut.
Intelligent Edge (IE) was a different company when it was listed and has since changed hands a couple of times. The company was originally an object-oriented software company before it transformed itself into a specialist in mobile technology solutions. Its CEO Anil Chet Karamsingh came on board in January 2007 and brought with him a wealth of experience in the telecommunications industry

“IE started as a software company with products such as payroll, HR, knowledge management portal, supply chain management, customer relationship management. The problem was that the market was saturated. At the time, a lot of Indian software companies had penetrated the market here.

“The company had a sound business model but the market environment and cost of delivery affected it. We came in and went for more bread-and-butter services. One thing that people needed was clear and cost-effective voice application. We teamed up with companies to provide soft suite services and free IP calls,” Anil says.

His partner Cheong Cheng Onn, who is the CFO/executive director, was roped in to manage and grow the company.
“We changed the mandate and the direction of the company. In the third quarter, IE made some profit. We had RM9 million of accumulated losses at one stage, but we managed to trim that down,” Cheong says.

Investors must be looking forward to a better performance from the company after years of disappointment.
After IE came Kotra Industries, which is one of the more successful stories. It transferred its listing to the Main Board in July 2007. The company is involved in developing, manufacturing and trading pharmaceutical and healthcare products.

Nevertheless, trading in these stocks was lacklustre then. Operational issues, such the hassle of having to maintain two separate systems by the brokers — for the KLSE (now known as Bursa Malaysia) and the Mesdaq Market — made trading on the latter less appealing.

“The broking houses would have to buy another computer just to install the Mesdaq trading system and place the computer in a corner. Some brokers didn’t even have the Mesdaq trading system up and running. So, there was no or little trading. I visited some of these brokers and the system was just sitting on the floor,” recalls Palette’s founder and chairman Eg Kah Yee. Palette is a solutions provider for broadband, wireless and networking products and services.

Naturally, after the uninspiring trading of the earlier listed stocks and their operational issues, people were worried when Palette applied for a listing.
“In 2000, the authorities were promoting Mesdaq heavily. That time, it looked very promising. I thought it would work and also [help] support the Mesdaq Market. If nobody wanted to list there, it would never get started. When we got there, we realised the trading system was not there and the stockbroking houses were not ready to do it. Essentially, it was a system problem, the broking houses, the distribution channels, where investors had no access to information on Mesdaq,” Eg says.

Also, there were difficulties in getting shares placed to institutional investors, he adds.
“Most of the local funds did not recognise Mesdaq and did not have approval from the boards to invest in the Mesdaq Market. We had to work through the process and get the board to approve investments in Mesdaq. Then, we got Tabung Haji and other venture capitalists to come in as shareholders during our initial public offering in 2001.

“When we managed to get the big funds in, other companies started to come onto Mesdaq. If we didn’t make it, other companies would not be motivated at all. We literally helped break the barriers for investing in the Mesdaq Market. After that, there were more applications for listing,” Eg says.
According to Bursa Malaysia Bhd’s head of market and issuers strategy, Arulnathan Michael Dass, the problem with Mesdaq-bound companies getting placees was that investors were not used to investing in “greenhorns” or companies that were fairly young and unproven in terms of track record.

“Any start-up will have problems in trying to launch its first product. At the time, investors were so used to investing in Main Board and Second Board companies. A lot of education needed to take place on how to value, invest and trade in Mesdaq companies. It had more to do with people’s perception of the risk profile and risk-return trade-offs,” he says.

The big break
The turning point for Mesdaq came when it merged with KLSE in 2002. “The merger came about pursuant to the capital masterplan. There was duplication of capital markets. The market then was too small to support two separate exchanges. The consolidation was to profile a single exchange from a country perspective and for synergistic purposes,” Arulnathan says.

Eg agrees. “Merging the bourses was the right thing to do. The market could not support two systems,” he says.
True enough, the share prices of these companies appreciated soon after the merger due to immediate accessibility to the then KLSE distribution channels. Among the first few companies to list on Mesdaq after the merger was PUC Founder, in April 2002. Interestingly, the company started off as an IT solutions provider to local and regional publishing and printing companies.

“We foresaw that the Malaysian electronic publishing industry would not grow as the newspaper market was shrinking. We wanted to develop biometric products and we needed funds for production and marketing activities,” says managing director/CEO Teh Hon Seng.

After much trial and error, PUC is now one of the leading players in fingerprint security systems.
Willowglen, which was also listed in April 2002, is a pioneer in developing integrated supervisory control and data acquisition (SCADA) systems. Managing director Khor Chai Moi says the company opted to list on Mesdaq as a way to tap the capital market and help raise the company’s profile. “In the early years, listing was the ultimate objective of a company and gave us a real sense of achievement,” she says. Looking back, she says while it was challenging getting listed, it has been “worth it”.

This article appeared in netv@lue2.0, the technology section of The Edge Malaysia, Issue 787 Dec 28 - Jan 10 2010