A beginner’s guide to applying for IPOs in Malaysia

Have you ever wondered what it feels like to invest in a company before it becomes a household name? Perhaps you missed out on one of Malaysia’s most talked-about recent IPOs, like 99 Speed Mart Retail, which surged 14% on its market debut, creating a buzz among investors.

IPOs can be opportunities to tap into the growth of emerging businesses in Malaysia. Yet, many people are unsure how to begin. In this guide, we’ll cover everything you need to know about applying for an IPO in Malaysia, including what an IPO is, how to apply, and the risks involved.

Understanding IPOs

An initial public offering (IPO), often referred to as ‘going public’, is the process where a private company transitions to a publicly listed entity by offering its shares to the general public for the first time.

For businesses, this serves as a strategic method to raise capital for expansion, fund new projects, invest in research and development, repay debt, or achieve other financial objectives. For investors, IPOs present an opportunity to purchase shares at a set price, with the potential to benefit from significant price increases once the stock starts trading on the market.

How to apply for an IPO in Malaysia

Now that you’re interested in an upcoming IPO, how can you apply for it? To participate in an IPO in Malaysia, follow these steps:

1. Ensure you have a direct CDS account. To own shares in Malaysia and submit an IPO application, you must have a Central Depository System (CDS) account. Authorised depository agents, usually banks or stockbrokers, can help you open a CDS account, and your securities will be stored in this account electronically.

2. Choose your application method. There are three primary methods to apply for an IPO:

• Manual application using application forms (white)
  • Obtain the White Application Form from issuing houses, stockbroking companies or financial institutionsFill in your details, ensuring they match your identification documentsAttach a banker’s order payment slip for the number of shares you’re applying for.
  • Submit the completed form directly to the issuing house or via postal mail.
• Electronic share application (ESA) via ATMs
  • Use an ATM of a participating financial institution where you hold a savings account.Select the ESA option and follow the on-screen instructions.You’ll need your ATM card, PIN, CDS account number, and the IPO stock code.
  • After completing the application, retain the printed ATM slip for your records.
• Online application
  • Log in to your bank’s Internet banking portal.Navigate to the IPO application section.Select the desired IPO and enter your CDS account number.Confirm the number of shares you wish to apply for and proceed with the payment.
  • This is the easiest and most commonly used method nowadays, as it can be done from the comfort of your home

Note: Procedures may vary between banks, so checking with your bank for specific instructions and applicable fees is advisable.

3. Review the IPO prospectus. Researching the company is necessary before applying, and the simplest method is to read the prospectus thoroughly. It may be a dry read, but the document provides detailed information about the company’s profile, core business, management, financial positions, corporate strategy, securities offered, use of proceeds, associated risks and more.

4. Submit and await balloting results. The application form must be submitted within the stipulated period, and then you will wait for the result. If the IPO is oversubscribed (often the case for Malaysia IPO), a balloting process will determine the allocation of shares. You’ll be notified of the outcome, and any unallocated funds will be refunded to your account.

Pro and cons of investing in an IPO

Investing in IPOs comes with both opportunities and challenges. Here are the pros and cons to consider:

Pros

• Early access. An IPO allows you to invest in companies at an early stage of public trading. Getting in early on businesses with solid growth potential can result in significant capital gains after the market has discovered their value.
• Discounted entry price. IPO shares are often priced lower than their potential market value to attract investors. If the company performs well, the post-listing share price may increase substantially, providing attractive returns.

Cons

• Limited information. Unlike established companies, IPOs lack a long-proven track record of financial performance. This makes it difficult to predict how the company will perform in the public market.
• Market volatility. IPOs are often subject to significant price fluctuations in the days and weeks following their listing. Even highly anticipated IPOs can also experience sharp drops if market sentiment turns bearish.

Historical Malaysian IPOs

Over the years, Malaysia has seen several landmark IPOs that have significantly influenced the market and drawn substantial investor attention. Spanning various industries, these IPOs highlight the vibrant and diverse nature of Malaysia’s capital market. Here’s a summary of some of the most notable IPOs in Malaysia leading up to the highly anticipated debut of 99 Speed Mart.

Upcoming IPOs in Malaysia

Malaysia’s capital market is poised for significant activity with several high-profile initial public offerings (IPOs) on the horizon. These forthcoming listings underscore the country’s dynamic economic landscape and offer investors promising opportunities.

U Mobile, Malaysia’s youngest telecommunications provider, is planning a domestic IPO expected to raise over $500 million (approximately RM2.3 billion) in the first half of 2025. This move could mark Malaysia’s largest IPO in nearly eight years. The proceeds are intended to fund the expansion of U Mobile’s mobile data network. The company has been preparing for this listing since 2014 and aims to participate in the development of Malaysia’s second 5G network.

TNG Digital, the operator of Touch ‘n Go eWallet, is exploring a potential domestic IPO within the next two to three years, aiming to raise over $300 million. The company could achieve a valuation exceeding $1 billion, attaining unicorn status, before the IPO. Established in 2017 through a partnership between Touch ‘n Go and Ant Financial, TNG Digital has grown rapidly, with its eWallet commanding more than 20 million verified users and facilitating payments for over two million merchants in Malaysia.

Bursa Malaysia is proactively enhancing the IPO ecosystem by implementing a new framework that sets performance benchmarks, such as price-to-earnings ratios and return on equity, to improve shareholder returns of listed companies. Additionally, Bursa Malaysia aims to increase the number of IPOs to 50 in 2025, up from the 42 anticipated this year, reflecting a commitment to fostering a robust and dynamic capital market. These developments indicate a vibrant future for Malaysia’s capital market, offering investors diverse opportunities across various sectors.

The fifth perspective

Participating in an IPO can be a rewarding venture, offering opportunities to invest in emerging companies with significant growth potential. The process has become increasingly accessible, with many stockbroking companies simplifying it to the point where applications can be completed with just a few taps on your phone. However, it remains essential to conduct thorough research, fully understand the application process, and carefully evaluate the associated risks.

Malaysia’s IPO landscape showcases a mix of past successes, such as Petronas Chemical and 99 Speed Mart, along with exciting upcoming opportunities like U Mobile. Bursa Malaysia’s efforts to enhance its IPO framework are likely to attract more companies to the market, creating additional opportunities for investors. In my opinion, these improvements could further bolster investor confidence and inspire greater participation in Malaysia’s growing capital market.