Focus on creating value

During the panel session, it was noted that Malaysia’s IPO market has remained resilient, with Bursa Malaysia continuing to outperform its Asean peers despite broader macroeconomic headwinds. Bursa is targeting 60 IPOs this year.

“Last year, we had a remarkable year where we scored tops in Asean, not only for the number of IPOs, where we did 55 IPOs. We have also raised the most amount of funding in the whole of Asean,” said Leong See Meng, the director for origination and listing of Bursa Malaysia Bhd (KL:BURSA).

Leong stressed that the key to pursuing an IPO is recognising that it is not an endgame, but rather a launchpad for long-term growth and a new phase of value creation for the company.

“The main reason why you want to go for an IPO is to raise capital and add more value to the company and yourself. And you want to raise shareholders among people with the like mind, people who believe in yourself, to actually follow you by investing in your company,” said Leong.

He cited the example of Johor Plantations Group Bhd’s (KL:JPG) debut on the Main Market, where its share price opened at 84 sen with an opening volume of 5.7 million shares, representing a market capitalisation of RM2.1 billion.

“By year end, the market recognised what they were doing. They recognised that they were not only going for the top end of the market, they were also helping the bottom end of the market, where they were a very strong piece in the social place where they actually helped the small holders as well,” said Leong.

He went on to say that once the market understands a company’s core business model, its performance, and how it manages investor relations, it fosters trust and signals a level of transparency that is essential for a healthy economy.

While financials are important, companies must also understand how to position themselves and communicate their purpose. This is especially important in sectors involving complex operations and services. Tech companies planning to go public need to be able to articulate their offerings in layman’s terms to gain visibility and attract investors.

At Bursa, Leong noted that there is now a stronger emphasis on aligning with the National Semiconductor Strategy. This includes encouraging not only established firms but also start-ups, mid-sized enterprises, and venture-stage companies in the tech and semiconductor sectors to consider listing.

“The reason why I say that is because the price-earnings (P/E) ratio for tech is actually not too bad. I mean, you are looking at 20.7 times, which is the second highest on Bursa, just behind healthcare,” said Leong. The P/E ratio compares the stock price to earnings.

Tech companies should position themselves at the right point along the value chain, said Leong. He also noted that the current local listing guidelines are supportive of tech firms.

“If you meet the [required financial criteria], you can hit the Main Market immediately. For example, TSiC Bhd (KL:TSIC). They are in the semiconductor services space and had just listed with a 10 cent IPO price and saw an immediate 10% gain,” he said.

TSiC Bhd debuted on Bursa’s Leading Entrepreneur Accelerator Platform (LEAP) Market, a platform designed to help small medium enterprises (SMEs) access capital markets with less stringent regulatory requirements. LEAP, said Leong, serves as a feeder market into the Access, Certainty, Efficiency (ACE) Market. Once companies become sizeable enough, they can graduate to the ACE Market.

“So, I don’t see it being difficult for tech companies to actually get listed. It’s all about your story. It’s about how you sell it and the segment that you are in,” said Leong.

Datin Eloise See, the managing director of ACE Market-listed automotive tech firm KHPT Holdings Bhd (KL:KHB), shared how listing improved capital access, visibility and credibility, and that it is especially important for SMEs, so that they can invest more into preparing for emerging sectors like electric vehicle manufacturing.

“One of the very good things about listing is also the funding you can get to invest more in new technology and improvement of your processes. If processes are improved, cost and efficiency also improve,” said See.

Susie Wong, an independent director at a telecommunications service provider in Kuching, Reach Ten Holdings Bhd (KL:REACHTEN), shared the same sentiment. Wong said that listing helped with their growth trajectory and increased their fibre optic coverage from 200km to 500km three years post listing.

Preparing for public listing is no easy feat. It requires a mindset shift, strong internal controls and a committed team. Beyond scaling, it’s about transparency, governance and sustainable growth. “I think we can rightly say that planning is very important. So you must start early and if you are unfamiliar, it’s good to appoint an internal control consultant to go through your internal controls to make sure that everything is prim and proper,” said Leong.

He emphasised the need to get everything in order and identify what needs to be implemented to ensure full compliance with legal requirements, corporate governance standards and related regulatory expectations.

He stressed the importance of getting everything in order and identifying what needs to be implemented to ensure full compliance with legal requirements, corporate governance standards and relevant regulatory expectations.

“Get your books prim and proper. You are going to graduate to become a listed company so you can no longer run it like a privately held entity. The mindset has to change. Your internal controls have to change, and a responsible adviser will never tell you that it is an easy journey. It is a difficult journey, but it will be a fulfilling journey, because very often we are so engrossed in doing the business, we lose sight of the bigger picture,” said Tan Vee Han, the head of corporate finance at MainStreet Advisers Sdn Bhd.

Leong explained that proper accounting practices are crucial, as the Malaysian Financial Reporting Standards (MFRS) treat financial elements differently — for example, amortisation — compared to how a company may have previously managed its accounts.

“It’s important to get the company in shape. Because both the Securities Commission Malaysia and Bursa are committed to a three-month turnaround time once all questions are answered. So if your internal controls are in place, your story is right and everything falls in line, in three months, we will see it,” said Leong.

In the context of IPOs and the MFRS, the way amortisation is calculated can significantly impact a company’s reported profits. Some companies may appear profitable under their previous accounting methods but could report losses under MFRS rules.

Tan noted that having a strong finance team capable of responding promptly to both internal and external auditors is highly beneficial. He added that having a dedicated team to drive the company’s IPO agenda is equally important.

“Because we can’t focus on the IPO and lose sight of business as usual and vice versa,” said Tan.

See said that before approaching Bursa, it is important to assemble a team of advisers and professionals to handle the company’s due diligence. They must be able to guide and support the company, with a clear understanding of the business as a whole.

“Because in our business, there are many things that are unspoken values that maybe you will lose track of. And there are also certain areas that you need to watch out for [in your business]. So then it’s very important for them to understand your business,” said See.

On board composition, See said that diversity needs to be celebrated as it provides objective oversight and a diverse range of industry perspectives for better decision-making.

“As an owner, you cannot be a ‘pro’ at everything. We have to admit that we don’t know a lot of things, especially the deep and detailed matters. I think it’s very important to get a third perspective from a person that’s not from your company. Then they can provide you with a wider view in terms of the market, industry, or whatever suggestion they want to put in place,” said See.

The role of independent directors plays a crucial role in keeping the company accountable, fair and on track when going public in this regard. “As an independent director, if you see something that is not right or it needs to be looked into, you should speak up,” said Wong.

All in all, going public can be difficult and even intimidating due to the intense due diligence process, coupled with greater responsibility and accountability once getting listed.

“But I think with the right mindset and knowing why you are [going public] in the first place, just go for it and don’t think too much,” said See.