IPO IN A DYNAMIC MARKET

KUALA LUMPUR: The process of going public is a complex one, involving meticulous preparation, regulatory compliance and strategic financial planning.

For any one company, choosing its advisers can perhaps be one of the most important aspects of this journey that has become a rite of passage for many.

The journey into compliance, transparency, accountability and expansion requires trust and a solid working relationship.

Kenanga Investment Bank Bhd (Kenanga) executive director and head of group investment banking and Islamic banking Datuk Roslan Tik says one of the more important aspects of helping a company go public boils down to the human factor.

“There is nothing digital, nothing fancy about it, just basic old-school relationship factors.

“It is about the capacity and service level you can provide. At the end of the day, it is a natural chemistry factor and the best man wins,” he tells StarBizWeek in a recent interview.

Roslan: One of the more important aspects of helping a company go public boils down to the human factor – the capacity and service level that one can provide.

According to Roslan, Kenanga has had several repeat clients because of their proven capabilities and strong delivery capabilities.

“In terms of distribution, we are one of the strongest. Institutionally, everyone has similar connections but our core strength is the retail aspect as we are one of the bigger retail brokers if not the biggest around,” he highlights.

Roslan adds the investment bank also has a far reach in terms of investors.

This has worked out well for them particularly in the retail space.

This year to date, Kenanga has listed two companies – Well Chip Group Bhd on the Main Market and Kucingko Bhd on the ACE Market.

By year-end, Kenanga plans to complete one more ACE Market initial public offering (IPO) and a listing transfer from the LEAP market to the ACE market.

“For 2025, we have a few mandated IPOs, a couple more in the pipeline.”

Roslan adds that when listing, market timing is everything and plays a vital role in how successful the process can be.

“Ultimately, you can have the best IPO around, but if market conditions are not great, the response may not be encouraging unfortunately,” he points out.

He is optimistic about the market at the moment as current indicators signal a positive momentum.

“The market can be better, if we look at the FBM KLCI, the price earning ratio is doing about 16 times.

Listing on the local bourse eases future fundraising for companies.

“If you look at the average daily value (ADV) alone for the first eight months of 2024, the ADV averages RM3.6bil as compared to only RM2.2bil for the same period in 2023, reflecting the strength of the market at the moment.

“We expect the ADV for the whole year to record circa RM3.3bil-RM3.4bil,” he adds.

In general, Roslan says Malaysia is blessed because of the ample liquidity it has across the board.

“If you look at the subscription rate alone especially in the recent IPOs offered to the market, that itself is evident of our liquidity surplus as far as the market is concerned.

“This is further bolstered by the recent strengthening of the ringgit”, he mentions.

Marketability and liquidity, key post-IPO advantage

“I’m proud to say our core people are still with us for the longest time.

“And this actually carries us through all these years. For potentials, what I can say is we will give you a one-to-one service and handhold you all the way to the listing day.

“That’s what we do best and we will continue to do so,” he says.

Meanwhile, Roslan also says listing on the local bourse is something companies should seriously consider, it is after all an easier way to fundraise for future plans.

When it comes to fundraising, the listed securities provide an additional source of liquidity to leverage the business further as they can use that as a form of a currency.

“For instance, listed shares are generally an acceptable form of currency to pay for acquisitions for expansion,” he adds.

Alternative markets, key post-IPO advantage

Interestingly enough, Roslan says he has also noticed a gaining interest in the private markets as a form of getting funds.

“Creditors can be in the form of a bank, private investors and even foreign investors.

“But the private markets are actually an interesting one whereby for high net worth clients, they may set up a registered fund for entrepreneurs,” he says.

This showed that the dynamics of fundraising has certainly evolved over time.

“It is no longer just about borrowing from the banks.

“Asset managers and fund managers need to be innovative because they too are in search of diversified alpha”, he adds.

“Generally, the asset management industry has not been aggressive in this area save for a few where we are seeing some have gone into these alternatives investment and private credit space, including Kenanga.”

This, he says, has provided another form of market participant to the ecosystem hence regulatory environment needs to facilitate this further.

Investor protection, stricter licensing rules

Together with the vibrant market, scammers too take the opportunity to capitalise the situation.

Roslan acknowledges that this area is also where scams have taken place the most, particularly with the vulnerable ones.

He says he is glad that regulators have now been actively trying to put a stop to non-licensed people marketing investment products which they themselves cannot comprehend.

In recent week, the Securities Commission has issued a Guidance Note on provision of investment advice.

This is deemed a regulated activity and if someone conducts such activities without a Capital Markets Services Representative’s license, for example, investment and financial influencers, they can be charged with a fine not exceeding RM10mil or face jail time not exceeding 10 years.

This he says should help to address the increasing occurrence of investments scams in the market place.