The LEAP Market is a new market offered by Bursa to provide SMEs with greater fund raising access and visibility via the capital market, though the market will only be accessible to sophisticated investors.
CIMB Equities Research said under the IPO, the group issued 50 million new shares, representing 6.4% of the company’s enlarged share capital, at an issue price of 11 sen for a total value of RM5.5mil, ahead of the listing.
It plans to use the funds raised for working capital and expansion of its business to Indonesia and the Philippines.
Based on its IPO price, Cloudaron will have a market cap of RM85.3m. Profitable company that generates bulk of revenue from Singapore.
“Cloudaron is controlled by its managing director and chief executive officer, Ong Chang Jeh, who owns a 34.3% stake, and chairman Datuk Larry Gan Nyap Liou, who holds an 8.1% stake.
“For FY3/17, Cloudaron posted a net profit of S$1.72m (RM5.2mil), on revenue of S$22.9mil (RM69.6mil). The group generates 81% of its revenue in Singapore and has an orderbook of S$4.1mil as at end-Jun 2017.
CIMB Research said the LEAP market offers small and medium enterprises (SMEs) in the early growth stages a way to raise funding through the capital market due to its less stringent listing requirements compared to the Main and ACE markets.
According to the research house, Bursa Malaysia is the single approving authority for listing, which could accelerate the processing time to raise capital and list.
The market could also serve as a feeder to the ACE or Main markets.
However, CIMB Research said the key challenges facing the LEAP market in our view, is liquidity, as the market is restricted to sophisticated investors, such as high net worth individuals that own assets of more than RM3mil or with an annual income of more than RM300,000 or a combined RM400,000 for husband and wife, and corporate bodies with net assets of more than RM10mil.
“This will reduce the number of investors that can participate in the market.
“A strong share price performance by Cloudaron could attract more SMEs to list on LEAP and liven up the Malaysian stock market.
“However, it is not expected to have a major impact on the market, as the LEAP market is small relative to the combined market capitalisation of all the companies listed on the main and ACE markets of RM1.83 trillion. Maintain KLCI target of 1,790 points (16 times price-to-earnings) and our top three picks continue to be Axiata, Tenaga and Gamuda,” it said.