Time for Bursa Malaysia to clarify

G Neptune Bhd submitted a business regularisation plan last year, that would see LHO Group come in as a white knight.

After a lengthy consideration, Bursa Malaysia rejected the proposal late last year.

Its overarching reason is that LHO was not a suitable company to meet its listing requirements. But questions over one of Bursa Malaysia’s reasons for the rejection are raising concerns.

Among the reasons given was that LHO was recording negative cashflow despite posting a profit over the past four years.

Bursa Malaysia said LHO had to rely on loans and borrowings to sustain its operations and given its high gearing and negative cashflow from operations, this could be an issue if loan facilities were reduced.

But Bursa Malaysia calling LHO a company that raises public interest concern, and hence was the ground for rejecting the plan, is a grey area which is causing some discomfort among investors.

LHO is a company that distributes and sells alcoholic beverages. It is licenced to do that and based on the fact that it makes a profit, one can assume it has been paying corporate taxes.

Rejecting a company for a backdoor listing if there are doubts on the financial suitability of that company is fine but to reject a legal tax-paying company for a listing because there are “public concerns”, needs to be clarified.

Is Bursa Malaysia saying that it will not allow such companies to be listed? Is there a provision in its listing requirements that companies involved in the legal alcohol or related businesses cannot be listed in Malaysia?

Malaysia is losing ground and attractiveness when it comes to listings, especially among overseas companies.

With the next wave of technology companies coming to the fore, especially with the digitalisation of the economy, the need for capital for growth is going to be huge.

Some of those companies might very well be fintech-related, and may not be fully syariah-compliant should they deal with interest-rate bearing instruments.

Furthermore, vague restrictions may put off potential listings in favour of jurisdictions like Singapore, which has embraced a number of Malaysian companies to float their businesses in the republic.