Ace Market powers strong finish for Malaysia’s IPOs in 2023; momentum expected to continue

[KUALA LUMPUR] Most of Bursa Malaysia’s new listings ended 2023 above water, despite the benchmark FTSE Bursa Malaysia KLCI’s 2.7 per cent decline for the year.

The strong showing was thanks mostly to listings on the Ace Market, and market watchers expect continued strong momentum for this market in 2024.

Bursa Malaysia welcomed a total of 33 initial public offerings (IPOs) in 2023, collectively raising more than RM3.2 billion (S$914 million).

Of these, 25 listed on the sponsor-driven Ace Market for emerging companies, seven on the mainboard, and one on the Leading Entrepreneur Accelerator Platform (Leap) Market. Leap is an adviser-driven market for smaller companies. Unlike Ace, however, Leap is only accessible to sophisticated investors.

The number of new IPOs exceeded Bursa Malaysia’s target of 31 companies for the year – though this target was revised down in November, from 39 initially, due to fewer-than-expected listings on Leap.

At its peak in 2022, Bursa Malaysia saw 35 IPOs raising RM3.5 billion. There were 29 IPOs in 2021.

Kenneth Leong, head of research at Apex Securities, said many retail investors hopped on the IPO bandwagon after seeing the values of some new listings more than doubling on their first trading day.

“Tech-related IPOs on the Ace Market attracted large interest, especially in the second half of 2023, as many anticipate better growth prospects for tech industries as the global tech cycle is bottoming out,” he told The Business Times.

Good starts

Only eight companies out of the 33 newly listed ended their first days of trading lower than their IPO prices. The rest recorded price premiums of between 6 and 285.7 per cent.

Five companies saw their share prices more than double in the first day.

Ace-listed semiconductor company Oppstar ended its Mar 15 debut at RM2.43, with the highest premium of 285.7 per cent or RM1.80.

Ng Zhu Hann, chief executive officer of boutique fund manager Tradeview Capital, said the positive performance should motivate more companies to raise funds through Ace listings.

“The vibrant trading of IPOs on the Ace Market has fuelled the market interest. We observed that 80 per cent of the IPOs in this market were performing better than those in the main market,” he added.

On the last trading day of 2023, 10 of the year’s newly-listed companies ended lower than their IPO prices. Six of these were main market listings.

Of the seven main market listings in 2023, electronic manufacturing services provider Cape EMS was the only one to end the year above its IPO price.

It closed the year at RM1.06 – nearly 19 per cent or RM0.16 higher than its IPO price of RM0.90.

MST Golf Group was the biggest loser, ending at RM0.52 – nearly 36 per cent below its IPO price of RM0.81.

Not just trend-following

Trident Analytics founder and chief research officer Peter Lim said investors are attracted to Ace Market IPOs chiefly because of the lower entry price point and better growth prospects.

“It’s not just trend following. Savvy investors are looking at companies that have good potentials and lower price-to-earnings ratios,” he added.

Market interest in tech-related IPOs has also been spurred by positive news about the improved outlook for the global tech sector, as well as more multinational tech companies venturing to Malaysia, he said.

Examples of the latter are a partnership between US tech giant Nvidia and Malaysia-based YTL Power International to build an artificial intelligence data centre in Johor; Amazon Web Services’ plan to build cloud computing infrastructure in Malaysia; and Infineon Technologies’ five-year plan to build the world’s largest 200mm silicon carbide power fabrication plant in the country.

Staying strong

Market watchers expect the IPO market in Malaysia to remain strong in 2024. Leong said market sentiment has improved and is expected to be better in 2024, with an anticipated fund inflow into emerging markets – including Malaysia – following expected interest rate cuts by the United States Federal Reserve.

“Malaysia’s equity market is poised to attract investors for its healthy fundamentals, a better economic growth outlook and easing inflationary pressures,” he added.

Ng expects attention to stay focused on Ace this year. He noted that the implementation of a new regulatory framework in 2022 has simplified the Ace listing process, as it now requires approval only from Bursa Malaysia and not the Securities Commission as well.

The local bourse has yet to announce its IPO target for this year, but there are already two IPOs scheduled for Ace in the first quarter.

These are for power cable manufacturer Master Tec Group, slated to debut on Jan 29; and metal and industrial hardware supplier TSA Group, expected to list on Feb 2.

The Leap Market is in the midst of revising its transfer listing framework.

The new framework, which will govern how companies can move from Leap to Ace, is slated to be released by the second quarter this year.

With this clearer framework for transferring a listing, it is expected that more smaller companies will seek to raise funds through the Leap Market first, said Ng.