MANY of the large listed companies on Bursa Malaysia today were not always big. They had to start somewhere. Many of them had humble beginnings.
Thus, small and medium enterprises (SMEs), which comprise 99% of the business establishment in Malaysia, stand a chance to become public listed companies in the future. In fact, there are many SMEs that perform better than some listed companies nowadays.
Private equity firm NewAsia Capital Sdn Bhd associate director Sherilyn Foong says: “Definitely, there are many SMEs in Malaysia that have listing potential. After all, SMEs form the backbone of the economy.”
Sherilyn Foong ... ‘There are many SMEs in Malaysia with listing potential.’She says SMEs would need to plan way ahead to prepare themselves for a listing exercise, for example, by ensuring that their books are in order and their management team sound.
“While there is no technically stated minimum profit criteria to get listed on the smaller exchanges, they should be sizeable enough in terms of profit, revenue and cash flow to contemplate a listing,” she says.
If SMEs plan to list but are not familiar with the process, they can always ask their friends in listed companies, consultants, or even their own accountants, according to Foong.
“Nowadays, investment banking is so competitive that the investment bankers themselves, either from their primary bankers or otherwise, will find them (the SMEs). Not only that, even foreign investment bankers from other bourses will seek them out if they're sizeable enough,” she tells StarBizWeek, adding that some SMEs are indeed aggressively seeking to be listed mainly to raise funds for expansion purposes, or to monetise or unlock the value of their business or asset.
SMI Association of Malaysia national president Chua Tiam Wee says many SMEs in the medium-size category can potentially list their business, noting that some of them have profit records that are on par with listed companies, as well as good growth and high market share.
However, he reckons that the “high listing cost is one of the reasons that SMEs hold back their listing plan. Some of them would also worry about losing the flexibility of their management by going for a listing.”
Disclosure requirments are another obstacle to listing for SMEs, he adds.
“Our stock market is not attractive in giving a premium for a newly listed company as well due to poor market sentiment. SMEs that list may end up with a poor share price performance, which is not reflective of their business prospects,” he says.
Chua Tiam Wee ... ‘Some SMEs have profit records that are on par with listed companies.’Chua says the authorities can consider introducing an SME Board to attract more SMEs to list, which is done by the Shenzhen Stock Exchange.
According to Shenzhen Stock Exchange website, the launch of its SME Board has helped to facilitate the market economy and capital market.
One of the factors considered in the proposal for setting up the SME Board in Shenzen was to expand the direct financing channels for SMEs, enabling investors to share the fruits of economic development in China.
Chua says the authorities in Malaysia need to be more aggressive in encouraging SMEs to list; and that the listing cost should be lower and the listing requirements more flexible.
“SMEs have to realise the benefits of being a listed company. They can expand their business through the funds raised from the capital market, improve their credibility as well as attracting talents to join the company,” he says, adding that a listed company will also look more favourable to banks and be more established in the market.
