PETALING JAYA: After raising the largest initial public offering (IPO) proceeds in Asean for the first three months of this year, Bursa Malaysia is expected to see robust fundraising activities in the coming months.
Experts are anticipating more companies to be floated on either the Main Market, ACE Market or the LEAP Market, as companies are looking to raise funds for expansion.
Nevertheless, the views are mixed on whether the IPO proceeds of 2022 could surpass that of last year.
In 2021, there were 29 new listings that raised RM2.3bil in proceeds, according to the Securities Commission (SC).
The total market capitalisation of the 29 listings was RM7.01bil.
SC chairman Datuk Syed Zaid Albar had said on March 28 that 35 IPOs are expected on the stock exchange this year.
The positive expectation is underpinned by normalising economic conditions.
CLICK TO ENLARGE
Speaking with StarBiz, fund manager Danny Wong expects the IPO market to turn more active in the second half of 2022 as investor sentiment improves.
“The market is looking for new IPOs, since the performance of the existing listed stocks are not that exciting.
“With rising interest rates, investors are looking for more options to invest in.
“But, ultimately, the IPO market performance will be driven by overall market sentiment. If the new listings have good fundamentals, they should be able to perform,” said Wong, who is the chief executive ofifcer of Areca Capital.
Rakuten Trade head of research Kenny Yee also said there is a huge appetite for IPOs.
“There is a lot of cash circulating in the system looking for new stock ideas.
“Companies are also looking to raise funds as they recover post-pandemic,” he said.
According to Ernst & Young (EY), Bursa Malaysia is the best performing stock market in Asean in terms of IPO proceeds raised in the first quarter (1Q) of 2022.
“In Asean, Malaysia’s exchanges led by proceeds at US$362mil (RM1.5bil) via five IPOs,” it said in a statement yesterday.
The market is looking for new IPOs, since the performance of the existing listed stocks are not that exciting. - Danny Wong
Out of the five IPOs, two were large cap companies listed on the Main Market, namely Senheng New Retail Bhd and Khazanah Nasional-backed Farm Fresh Bhd.
Senheng was listed with an IPO market capitalisation of close to RM1.61bil, while Farm Fresh was valued at close to RM2.51bil at the time of listing.
In addition to the five IPOs, Pappajack Bhd was listed on the ACE Market early this month.
Cengild Medical Bhd and MN Holdings Bhd are expected to be listed on the ACE Market also this month.
EY also noted that Indonesia’s stock market was the most active by IPO deal numbers in the first quarter.
Indonesia saw 12 IPOs that raised US$219mil (RM926.5mil) in the period.
Across other Asean markets, Thailand’s exchanges saw five IPOs raising US$228mil (RM965mil), the Philippines Stock Exchange had four IPOs raising US$201mil (RM850.3mil) while Singapore’s Catalist welcomed three IPOs, raising US$17mil (RM72mil).
“Asean’s exchanges saw a 32% increase in deal numbers (29 IPOs in 1Q22, up from 22 IPOs in 1Q21), but a 57% decline in proceeds (US$1bil or RM4.2bil in 1Q22, down from US$2.4bil or RM10.2bil in 1Q21).
“The notable decline in proceeds was due to the lack of a mega IPO being posted in 1Q22, compared with one mega IPO a year ago,” it said.
On the global front, the IPO market performance in 1Q22 was less favourable.
The global IPO market saw 321 deals raising US$54.4bil (RM230.1bil) in proceeds – a decrease of 37% and 51% year-on-year, respectively.
“The sudden reversal can be attributed to a range of issues, both emerging and residual.
“These include the rise in geopolitical tensions, stock market volatility, price correction in over-valued stocks from recent IPOs, growing concerns about a rise in the commodity and energy prices, the impact of inflation and potential interest rate hikes as well as the Covid-19 pandemic risk continuing to hold back a full global economic recovery,” according to EY.
Areca Capital’s Wong said despite having more IPOs in Malaysia this year, the funds raised may fall below last year’s total proceeds.
“Funds are looking for stocks with uniqueness, so such IPOs may perform better than others,” he pointed out.
It is noteworthy that some of the new stocks listed since 2021, are currently trading below their issue prices.
Rakuten Trade’s Yee explained that apart from good fundamentals and sentiment, stocks need “reasonable valuations” to perform well.
“IPOs that were priced reasonably have performed well.
“Last year, some IPOs were not reasonably priced and they are having a tough time in terms of share price movement,” Yee said.Moving forward, he pointed out that retail participation in local stocks should be boosted, and a more aggressive IPO market could attract the retail investors.