Will 2023 see the return of large public listings?

Active market: A trading gallery of a brokerage in Kuala Lumpur. Bursa Malaysia is expecting 39 companies to launch their IPOs – most of them on the ACE Market – this year to raise proceeds of about RM3bil. — Bloomberg

BURSA Malaysia has been starved of large listings over the last few years. The heydays of many large initial public offerings (IPOs) seem to be over.

This year, the only likely large listing candidate seems to be DXN Holdings Bhd, which is involved in the sales of health and wellness consumer products. It filed its draft prospectus with the Securities Commission in June.

But since then, the company has delayed its listing due to weak market sentiment. It is a 50:50 chance that the company will make it to the market this year.

That is not due to the attractiveness of the company per se but rather dismal investor appetite. Convincing investors to put their money in a large consumer company is not an easy task, especially if valuations are not cheap.

However, if market sentiment does get better, then DXN will likely get more interest from funds in its bid to raise some RM1.8bil from investors.

The company has been reporting some healthy growth numbers and its export-driven business model should also be attractive features along with the healthy cashflows it churns out.

The problem is investors will always be asking if they could instead use their money to buy a cheaper-valued listed company in a similar business or size.

For example, recent large listings on Bursa Malaysia that sold their shares at seemingly high valuations didn’t perform well. They include Swift Haulage Bhd (which got listed in December 2021) and Senheng New Retail Bhd, that went public last January.

These companies were listed at price-earnings multiples of 21.5 times and 28.8 times, respectively. Their share prices were down 49% and 41.7% in 2022, respectively.

The death of large listings has bogged Bursa Malaysia since 2018. In that year, there were no large IPOs. Then in the years following that, there seems to be only one large listing every year.

In 2019, it was poultry giant Leong Hup International Bhd that raised around RM1bil, followed by MR DIY Group (M) Bhd in 2020 (RM1.5bil), CTOS Digital Bhd in 2021 (RM1.2bil) and Farm Fresh Bhd last year, which raised around RM1bil.

Large listings aside, it was IPOs on the ACE Market in 2022 that made the headlines. The 25 companies that got listed on the junior bourse made it a record-breaking year. Most of those counters are also enjoying a decent appreciation of their share prices following their flotations.

So will the ACE Market continue to see such stellar growth? It does look like it, going by what Bursa Malaysia CEO Datuk Muhamad Umar Swift said this week.

He noted that the exchange is expecting 39 companies to launch their IPOs – most of them on the ACE Market – this year to raise proceeds of about RM3bil.

He also noted that there is sufficient liquidity in the market and that the market is “generally strong” but cautioned that for these listings to succeed, it would need to be backed by investor sentiment.