PETALING JAYA: As Bursa Malaysia wrapped up 2024 with its best initial public offering (IPO) performance in nearly two decades, outdoing all other Asean exchanges, it has set a high bar for the new year.
Market pundits said it will be a tough feat to repeat or beat 2024’s performance, although they anticipate the IPO market to continue seeing a healthy flow of listings.
In 2024, it was not only about the number of new listings. In fact, more than half of the IPOs on the Main and ACE Markets outperformed the FBM KLCI, which closed the year up by 12.9% year-on-year.
On the contrary, only one out of five IPOs in 2024 is currently trading below its issue price, data revealed.
Overall, there were 55 IPOs on Bursa Malaysia in 2024, including four on the LEAP Market.
This is the best performance since 2005 when Bursa Malaysia recorded 79 IPOs in a single year. Some 78% or 40 of the IPOs in 2024 took place on the ACE Market alone.
BIMB Securities acting head of research Mohd Redza Abdul Rahman and Malacca Securities head of research Loui Low Ley Yee called 2024’s IPO market performance “encouraging”.
Mohd Redza told StarBiz that 57% or 29 out of 51 IPOs in 2024 outperformed the FBM KLCI with returns above 20%.
This excludes the LEAP Market’s new listings.
“Only 10 listings or 20% are under water. This is a very encouraging performance with the majority of them (all except five IPOs) having been listed before November,” he said.
Sector-wise, Mohd Redza noted industrials performed well in 2024, with 11 of its 16 IPOs in the money.
This was followed by consumer staples with five out of 10 IPOs in the positive zone, technology (four out of five), materials (four out of eight) and energy (all three IPOs).
“Interestingly, while the biggest listing last year was 99 Speed Mart Retail Holdings Bhd
with 50% returns since its IPO, we also saw a number of IPOs in the billion-ringgit market cap club.
“Some of these IPOs saw great returns, namely, Master TEC Group Bhd (220%), Keyfield International Bhd (142%) and Johor Plantations Group Bhd (58.3%).
“Others like Alpha IVF Group Bhd, TMK Chemical Bhd and Prolintas Infra Business Trust saw returns of between 4.2% and 4.7% since their listing.”
While the bigger stocks performed well, Mohd Redza said small-cap IPOs were the underperformers. Eight out of 10 IPOs are currently in the red.
Malacca Securities’ Low said the IPO market was positive in 2024, with first-day performances generally averaging premiums of 30% to 50%.
“I believe the positive performance should be able to sustain going into 2025, supported by a growing economy and sustained foreign direct investment. Sentiment should be positive, at least for now,” according to him.
When asked about the sector that offered the most upside potential in terms of IPO listings, Low pointed to the technology sector.
“Also, if lesser funds are raised with lower price-to-earnings multiples, it will provide more upside opportunity.”
While it will be a challenge to replicate 2024’s good IPO run, Mohd Redza opined that investors could be drawn into the new listings if they are provided with enticing companies from sectors that fit the popular trends.
One such sector is technology or the digital economy that aligns with the government’s initiative on digital transformation, financial technology and cloud computing.
Renewable and green technology-energy transition is also a global mega theme and fits well with the country’s National Energy Transition Roadmap policy.
Other sectors are healthcare and biotech, industrial and manufacturing, as well as consumer goods.
“The healthcare and biotech sector will benefit from rising demand for healthcare and wellness services, not only from locals but also from tourists.
“Industrial and manufacturing will benefit from the fact that Malaysia is key in the global supply chain landscape and the New Industrial Master Plan 2030 is a key policy to drive interest in this sector.
“As for consumer goods, the civil servant salary hike and new minimum wage should see domestic consumption continue to increase, which will see better returns and hence interest from investors,” said Mohd Redza.
Setting foot into 2025, despite the uncertainties on the external front, the Malaysian stock exchange is expected to remain attractive for companies looking for capital fundraising.
“Looking ahead, we are committed to sustain the strong IPO momentum as we move into 2025,” said Bursa Malaysia chairman Tan Sri Abdul Wahid Omar.
In a statement on Dec 20, Abdul Wahid said 2024’s 55 IPOs was testament to Bursa Malaysia’s commitment in fulfilling its role as a key national growth enabler.
“The IPO proceeds enable companies to expand their businesses, grow the economy, generate higher profits, pay dividends to shareholders, contribute tax revenue to the government and create employment opportunities for Malaysians.”
Meanwhile, Bursa Malaysia chief executive officer Datuk Muhamad Umar Swift said the strong IPO performance reflects the continuous efforts by capital market regulators to provide facilitative regulatory frameworks that enhance market competitiveness and relevance.
These include a commitment to expedite approval for IPOs on the Main and ACE Markets, targeting a three-month approval period; widening the definition of sophisticated investors for the LEAP Market to include angel investors, venture capitalists and private equity firms, based on their knowledge and experience; and the LEAP Market Transfer Framework to facilitate eligible LEAP Market-listed corporations to graduate to the ACE Market.
“Interest from investors in the IPOs, generally good oversubscription rates and share price appreciation demonstrate confidence in the companies’ growth prospects.
“Bursa Malaysia is proud to rank first among Asean exchanges year to date, in terms of the number of IPOs recorded and total IPO funds raised,” Muhamad Umar said in the statement.
In 2024, the Main Market recorded 11 new listings, a 57% increase from the seven in 2023. The ACE Market achieved 40 new listings, 67% higher than the 24 listings in 2023.
As for the LEAP Market, it saw four new listings, marking a 300% increase from the single listing in 2023.
The 55 IPOs in 2024 collectively raised RM7.42bil in proceeds, marking a 107% increase from the previous year.
The 55 IPOs contributed a total market capitalisation of RM31.37bil to Bursa Malaysia based on their IPO prices, a 130% rise compared to 2023.
The five largest IPOs on Bursa Malaysia collectively contributed RM20.32bil in market capitalisation to the stock exchange, based on their IPO prices.
Beyond new listings, the main gauge of the stock market - FBM KLCI - rose by 12.9% in 2024 as it closed above the 1,600-point level by year-end.
Propped up by the ‘Santa Claus’ rally amid fund managers’ window-dressing activities, the index closed at 1,642.33 points on Dec 31, making it the second best Asean market after Singapore.
FBM Small Cap Index, however, underperformed FBM KLCI in 2024 as the former rose by only 9.85%.
The outflow of foreign funds and the net selling by retail investors for the large part of 2024 have affected the performance of small-, mid- and large-cap stocks.
