It’s Going to be A Good Start for IPO Market

According to Bursa Malaysia, 2023 could be another robust year for the IPO market. The regulator is expecting about 39 companies to seek listing this year with an estimated RM3 billion in proceeds to be raised. Bursa Malaysia is expecting the new listings to be mainly on the ACE Market compared to the Main Market and LEAP Market due to the flexible requirements of the ACE Market.

Since the beginning of the year, Bursa Malaysia has been active with 9 companies (7 on ACE Market and 2 on Main Market) listed successfully in less than 3 months. These listings have collectively raised close to RM1 billion, a good start for the IPO Market and also a strong indication of a more active IPO market to come in 2023.

Source: Bursa Malaysia

The latest 2 listed companies i.e. Cape EMS Berhad and Oppstar Berhad, which were just listed in March, have been gaining much spotlight for their debut performances upon listing. 

Cape EMS Berhad, an electronic manufacturing services (EMS) provider, made its debut on the Main Market. The stock opened at RM1.42 and finished at RM1.50 on its first trading day against its listing price of RM0.90, a hefty gain of about 67%, beating all 5 companies that made their debut on the Main Market over the past year. 

The integrated circuits (IC) and turnkey solutions provider, Oppstar Berhad, is the best performing IPO so far in the first quarter of 2023 with the stock surged 286% on its first trading day on Bursa’s ACE Market. The stock opened at RM2.05 and hit RM2.95 high before closing at RM2.43 over its listing price of RM0.63. Oppstar’s first day trading performance has outperformed other debutants in ACE Market so far, namely TT Vision Holdings Bhd, Nationgate Holdings Bhd, Wellspire Holdings Bhd and L&P Global Bhd.

Reason Driving the Gains

Improved market sentiment, attractive IPOs’ valuations, limited number of shares offered and high subscription rate are among the key reasons for the stellar performance of some of the recent listings. With that being said, attractive valuation is the main factor driving the share prices up and the company had seen big improvement in its quarterly net profit prior to listing. As we can see from the current listing, technology-related companies are gaining much attention and fare better than companies from other sectors. This is a solid indication that there is still strong interest in technology-related companies despite the current weakness in the tech industry globally due to the US-China trade war. Investors are still drawn to the long-term growth of the sector, regardless.

As for the improved market sentiment, the momentum from the success of the first IPO is building up and the expectation that the next and coming IPO will do well puts them in the limelight and attracts more investors. With the investors’ confidence level slowly recovering, the market is poised to return to its former glory in time to come.

The limitation in allocation for public balloting is also one of the reasons driving subscription rates high. The allocation for public balloting can be as low as 2% and less where bulk of the allocations usually go to the high-net-worth individuals and institutions, resulting in IPOs being oversubscribed by more than 5-10 times. 

The reason the public portion is getting smaller could be due to the promoters’ preference to work with long-term investors such as high-net-worth individuals and private banking clients. These investors are savvier and typically stay with them for a longer term. All these factors contribute to the successful performance of the IPO.