IN the first quarter of 2022, we witnessed the listing of two large-cap companies, Senheng New Retail Bhd and Farm Fresh Bhd, on the Main Market of the Bursa Malaysia Securities. Based on the IPO Performance Report prepared by Bursa Digital Research, a total of five companies with a combined market capitalisation of RM4.41 billion were listed in the first quarter of 2022. As more companies explore conducting an IPO (initial public offering), here is a practical guide to listing in Malaysia.
An IPO is a public issue of shares which transforms a private company into a public company. This is done by making its stock available for subscription by members of the public. Companies seeking listing in Malaysia can consider a listing on the Bursa Malaysia Main Market, ACE Market or LEAP Market.
A listing on the Main Market is subject to approval by the Securities Commission Malaysia (SC) pursuant to section 212 of the Capital Markets and Services Act 2007 (CMSA) and an approval-in-principle for the registration of the prospectus under section 233 of the CMSA. The Main Market is a primary market listing for established companies that have met the standards in terms of quality, size, and operations.
Following the SC’s Equity Guidelines, an applicant seeking listing on the Main Market must satisfy either of the following tests:
Profit test
● Uninterrupted profit of three to five full financial years based on audited financial statements
● Aggregate after-tax-profit of at least RM20 million and after-tax profit for the most recent financial year of at least RM6 million
● The applicant has been operating the same core business over the profit track record
Market capitalisation test:
● Total market capitalisation of at least RM500 million upon listing
● Core business generated operating revenue for at least one full financial year before submission.
Infrastructure project corporation test:
The applicant has a right to build and operate an infrastructure project within or outside Malaysia, with project cost of not less than RM500 million and the concession or license awarded has a remaining tenure of at least 15 years from the date of submission to the SC.
The ACE Market is a sponsor-driven market designed for companies with growth prospects and the LEAP Market is an adviser-driven market to provide emerging companies – including small and medium-sized enterprises – with greater fund-raising access and visibility via the capital market. Generally, there are no minimum operating track record or profit requirements for the ACE Market and the LEAP Market, and Bursa Malaysia relies on the sponsor to assess the suitability of the applicant. A listing on the ACE Market and the LEAP Market are both subject to Bursa Malaysia approval.
In addition to a healthy financial position, an applicant should have an identifiable core business, management continuity and capability, good corporate governance, no conflict of interest and strong business prospects.
In general, there are four significant milestones for a listing process – presubmission; regulatory approval; post-approval; and listing.
During the presubmission stage, advisers will be appointed to conduct due diligence and internal control reviews of the applicant, promoters, substantial shareholders, board members and key senior management. Lawyers will commence drafting the prospectus and the application pack. The working group will prepare for formal consultation meetings with the SC or Bursa Malaysia.
During the approval stage, the principal adviser will conduct a mandatory consultation with the authorities, prior to submission of any formal application. Subsequently, the prospectus – prepared in accordance with the Prospectus Guidelines issued by the SC – will be submitted and a copy of the draft prospectus will be published on the SC website with an invitation for public comments. Concurrently, the principal adviser will receive queries from the SC or Bursa Malaysia and the working group must provide responses to such queries within a reasonable time.
Upon approval for the IPO proposal and approval-in-principle being granted for registration of the prospectus, the applicant will update the prospectus and hold verification meetings to prepare for lodgment of the prospectus with the SC or Bursa Malaysia. During the post-approval stage, underwriting arrangement must be finalised prior to the registration and lodgment of the prospectus.
The final stage involves the launching of the prospectus, investors briefings, public balloting, allotment of shares to successful applicants and the listing ceremony at Bursa Malaysia. The trading of shares will commence on the listing date.
Pursuant to the provisions of the CMSA, any statement or information to be submitted to the authorities shall not contain any material omission or statement that is false or misleading. As such, it is critical to obtain independent legal advice to ensure due and reasonable enquiries were made and to establish a defence against the prosecution or proceedings under the CMSA.
This article is contributed by Chong An Yee and Annette Soh (co-head of capital markets) of Christopher & Lee Ong.