Articles
Backing SMEs – nation’s next growth drivers
SMES – small and medium enterprises – play a strong role in the Malaysian economy. They make up 98.5% of all business establish-ments, according to SME Corp Malaysia – in 2018, there were more than 900,000 SMEs in Malaysia alone.
SMEs, in particular start-ups, may have difficulties raising funds for expansion. They typically lack a track record, adequate collateral and enough visibility. Bursa Malaysia provides pertinent exposure for this underserved segment to generate capital.
Bursa Malaysia offers two platforms for companies like these – ACE Market and the innovative LEAP Market.
The LEAP Market – helping drive growth and regionalisation
Bursa Malaysia’s LEAP Market was launched in July 2017. The first of its kind in Southeast Asia, it is an alternative and efficient fund-raising platform for SMEs. It puts Malaysia ahead of the region in terms of capital market innovation, increasing the nation’s com-petitiveness as a regional centre of innovative fundraising.
The LEAP Market is cost-efficient with a low average cost of listing, requiring only simplified offering documents that can be prepared by advisers, and has a streamlined approval process, where Bursa Malaysia is the single approving authority – resulting in a quicker time-to-market of about three weeks.
Applicants have access to a larger pool of advisers that include corporate finance advisers. The rules require only a 10% public spread, without a maximum limit on the funds raised, and they can list ordinary and preference shares as well as convertible securities.
Post-listing, the requirements are equally facilitative, catered for SMEs: they need only to provide semi-annual financial reporting and annual audited accounts, and there is no need for independent directors, an audit committee or nomination and remuneration committees. The require-ments for further fundraising are also liberalised compared to the Main and the ACE markets.
Whom the LEAP Market attracts
The LEAP Market has quickly demonstrated the ability to attract up-and-coming tech-nology companies. For promising com-panies, the increased visibility and access to capital gives them a chance to raise capital and become household names, regional champions and even global players like other SMEs before them.
The share price performance of LEAP Market companies has shown there is great interest. As at Aug 28, 2019, the average market capitalisation of LEAP Market companies has risen by 69% since listing.
The LEAP Market is limited to sophisticated investors – defined as individuals who have a gross annual income of RM300,000 (RM400,000 if combined with their spouse) and above or have at least RM3 million in net assets, or they may be corporations with net assets of at least RM10 million. These investors typically have the experience, savviness and risk appetite to invest in companies at an early stage of development.
What participants are saying
Lum Piew, executive director of Cloudaron Group Bhd, has this to say: “As a technology SME, the listing lends credibility and branding in a crowded, high-growth industry.” The first company listed on the LEAP Market, Cloudaron has gained access to the US and Canadian markets.
Hon Yuen Siow, managing director and CEO of Uni Wall APS Holdings Bhd, said: “Since our listing on the LEAP Market in January this year, we have had greater support in obtaining financing facilities from banks both locally and abroad. This has helped us in our expansion plans; directly enhancing our order book by four times higher from RM47 million to RM220 million. In addition, our higher market capitalisation of around RM325 million has enhanced the confidence level of our partners and stakeholders.”
Amlex Holdings Bhd co-founder and managing director Lim Say Soon found the LEAP market particularly suited to his needs. “The company has long desired to list – but we weren’t quite ready for the ACE market in terms of our scale and profitability. The LEAP market gave us the opportunity to tap into capital markets sooner than we otherwise could to fund our business expansion plans.”
The capital market – driving change from the roots of business
Bursa Malaysia’s innovative LEAP Market has helped SMEs fund their expansion and gain more exposure, allowing investors to gain early entry into innovative companies, thus potentially gaining exponentially from their growth.
To find out more about Bursa Malaysia’s LEAP Market, visit www.bursamarketplace.com or download the BursaMktPlc app.
Part of a series of articles by Bursa Malaysia to educate, develop and empower everyday investors.