Crucial need for clarity on LEAP-ING direction

Analysts call for transition roadmap to other markets

PETALING JAYA: When Bursa Malaysia rolled out the Leading Entrepreneur Accelerator Platform (LEAP) Market three years ago, its objective was to provide a platform for greater fund-raising access and visibility via the capital market for emerging companies and small medium enterprises (SMES).

The objectives were technically fulfilled and three years on, it remained just that.

Companies listed in this space that were ready for something bigger were basically left hanging because there has yet to be any transfer framework from the LEAP Market to the ACE Market or Main Market.

There are 34 companies listed on the LEAP Market and it will soon be down to 32 after two companies sought for their listings to be withdrawn.

Polymer Link Holdings Bhd was the first to announce its proposed delisting on Aug 19, citing greater flexibility as a private entity to streamline its business operations and also, due to the low liquidity of its shares.

On Monday, JM Education Group Bhd announced its proposed delisting, saying that it will accord the group greater flexibility as an unlisted entity to streamline its business operations and also, its current operation size and business potential were more suited for an unlisted entity.

While the public may feel that companies are starting to lose faith in the LEAP Market, analysts felt that it is mainly missing a crucial element – the transition roadmap to the ACE and Main markets.

Equitiestracker Holdings Bhd head of research Lim Tze Cheng felt that the LEAP Market would not be able to attract companies if it does not have such a transition framework.

“There is no clarity on what the criteria is for a LEAP Market company to be able to migrate to ACE Market.

“The irony is, LEAP is supposed to be a temporary market because these companies, when they raise that amount of capital and (assuming) they are going to grow very fast, then they are going to jump to the ACE Market.

“So it’s not about losing faith, it’s about the need to resolve the clarity of the migration criteria,” he said.

Rakuten Trade Sdn Bhd’s vice-president of research Vincent Lau concurred, saying that companies were still waiting for the transfer framework.

“I think the key thing for the LEAP Market is that it provides good exposure being a listed company, raises some funds and a bit of a profile.

“Look at it as a stepping stone or a training ground. It’s like an internship for companies before they get into the real thing,” he said.

Another problem pointed out by Lim is the expensive listing fees charged by corporate advisors and investment bankers.

Justifying how unrealistic the numbers were, he said companies aiming for LEAP Market listing plan to raise around Rm2mil to Rm3mil on average but the fees would have cost them around Rm1mil.

He suggested that if Bursa Malaysia wanted more companies on the LEAP platform, it should put a limit to the fees.

And as the LEAP Market is only open to sophisticated high net worth investors, this will definitely limit the level of liquidity of the counters, which in turn affects its fundraising abilities, as pointed out by Polymer Link.

“Liquidity is not so much of an issue if you are prepared to go for a PE model. If investors have a chance to participate directly in a venture capital, their capital is also locked up for at least five to 10 years. There’s also no liquidity here,” he said.

To illustrate how dull the liquidity on the LEAP Market is, its volume on Aug 11 when Bursa hit an all time high was only 997,000.

This is only 0.00004% of the 27.8 billion shares transacted in the open market that day. On normal days, it fluctuates around 10,000 to 200,000 shares.

“Look at it as a stepping stone or a training ground. It’s like an internship for companies before they get into the real thing.” Vincent Lau