Lecture 11 IPO.ppt guorav and clear newt

hu

1. Company Valuation andCompany Valuation and
Going for Public ListingGoing for Public Listing
Fin 6255 Financial Analysis for Strategic Decision PlanningFin 6255 Financial Analysis for Strategic Decision Planning
Dr. Salihin RamliDr. Salihin Ramli

2. Why Go Public?
1.Alternative source of financing
2.Ability to grow inorganically
3.Enhanced image and status of company
4.Enhanced liquidity
5.Ability to attract and retain quality
employees

3. 1. Alternative source of
financing
1.Alternative from conventional bank loans.
2.Capital from shareholders at minimal/no
cost.
3.Future fund raising could be structured
from company’s assets & cash flow into a
hybrid debt instruments/issuance of new
equity securities.

4. 2. Ability to grow
inorganically
•Opportunities via mergers and
acquisitions, through share swap
exercises which would not strain cash
resources.

5. 3. Enhanced image and
status of company
•Preference often given in awarding
major projects from view of more
prestigious, stable and financially
viable than privately held companies.

6. 4. Enhanced liquidity
1.Liquidity of securities enhanced
because tradable, and potentially at
premium.
2.Quoted securities acceptable as
collateral.
3.Avenue for promoters to exist/cash
out at premium.

7. 6. Ability to attract and
retain quality employees
1.Quality staff & professional
2.Employee stock option scheme.

8. Bursa MalaysiaBursa Malaysia
1.1.Main Board (main board Main Board (main board
++ MESDAQ) MESDAQ)
2.2.ACE MarketACE Market
3.3.SPASPA
4.4.LEAP MarketLEAP Market
CriteriaCriteria
1.1.Primary listing (local& foreign companies)Primary listing (local& foreign companies)
2.2.Secondary listing of foreign companiesSecondary listing of foreign companies
3.3.Special purpose acquisition co.Special purpose acquisition co.
4.4.Leading Entrepreneur Accelerator Platform (LEAP)Leading Entrepreneur Accelerator Platform (LEAP)
► Main Board: Total market capitalization upon listing: Main Board: Total market capitalization upon listing:
Min RM 500 milMin RM 500 mil
Before: Main Board 2007 (Oct):RM 1.5 bil, Second Board RM 40 milBefore: Main Board 2007 (Oct):RM 1.5 bil, Second Board RM 40 mil

9. Main BoardMain Board
►3 Alternative Routes for listing (i) Profit test, (ii) Market Cap test, (iii) 3 Alternative Routes for listing (i) Profit test, (ii) Market Cap test, (iii)
infrastructure project corporation test.infrastructure project corporation test.
►(i) Profit Track Record(i) Profit Track Record: Uninterrupted 3-5 yrs aggregate PAT RM20mil & : Uninterrupted 3-5 yrs aggregate PAT RM20mil &
latest RM6 mil. latest RM6 mil.
►(ii) Market Capitalization(ii) Market Capitalization: Min RM500 mil (offer price x enlarged share cap.): Min RM500 mil (offer price x enlarged share cap.)
(iii) Infrastructure Project corp.: (iii) Infrastructure Project corp.: Project RM500 mil project from govt & Project RM500 mil project from govt &
remain remain 15 years. If less 15 years, can go under (i).15 years. If less 15 years, can go under (i).
Minimum fund raised:Minimum fund raised: RM 150 milRM 150 mil
►Shareholding SpreadShareholding Spread::25% pub -1k shareholders hold min 100 shares 25% pub -1k shareholders hold min 100 shares
each.each.
►Continuity of MgtContinuity of Mgt:: Same management min 3 yrs prior sub to SC.Same management min 3 yrs prior sub to SC.
►Financial position & Financial position &
liquidity:liquidity: Sufficient min WC 12 months, +ve cash flow & no loss. Sufficient min WC 12 months, +ve cash flow & no loss.
►Lock-up PeriodLock-up Period::Promoters 6 months after admission. Infrastructure Promoters 6 months after admission. Infrastructure
project corp shareholders can sell with condition.project corp shareholders can sell with condition.
►Other RequirementsOther Requirements: : Bumiputera allocation of 50% of public spread Bumiputera allocation of 50% of public spread
requirement (co with Malaysian based operations).requirement (co with Malaysian based operations).

10. ACE MARKETACE MARKET
►Profit Track RecordProfit Track Record: None: None
►
►Shareholding SpreadShareholding Spread:25% pub. Min 200 shareholders hold 100 :25% pub. Min 200 shareholders hold 100
shares each.shares each.
►SponsorshipSponsorship::Engage sponsor if suitable for listing & stays 3 Engage sponsor if suitable for listing & stays 3
years after listing. years after listing.
►Financial position & Financial position &
liquidity:liquidity: Sufficient min WC 12 months.Sufficient min WC 12 months.
►Continuity of MgtContinuity of Mgt:: Same management min 3 yrs prior sub to SC.Same management min 3 yrs prior sub to SC.
►Other RequirementsOther Requirements: Bumiputera no requirement upon initial : Bumiputera no requirement upon initial
listing. listing. 12.5% Bumiputera 1 yr after achieving profit 12.5% Bumiputera 1 yr after achieving profit required to list required to list
in main market, or 5 year after in main market, or 5 year after listing in ACE market, listing in ACE market,
whichever is earlier.whichever is earlier.

11. LEAP LEAP
(Leading Entreprenuer Accelerator Platform)(Leading Entreprenuer Accelerator Platform)
►For SME to take local capital marketFor SME to take local capital market
►Present: 5 listed (out of 11 SMEs engaged with LEAP’s Present: 5 listed (out of 11 SMEs engaged with LEAP’s
approved advisers for assistance on the listing.approved advisers for assistance on the listing.
►But presently low in liquidity:But presently low in liquidity:
►1. Investment only restricted to sophisticated investors.1. Investment only restricted to sophisticated investors.
►2. No retail investors.2. No retail investors.
►3. Small size companies.3. Small size companies.
►4. Only to offer 10% of enlarged share capital to public.4. Only to offer 10% of enlarged share capital to public.

12. TimeframeTimeframe
Pre-listing Preparation workPre-listing Preparation work
•4 - 6 months4 - 6 months
•Appoint Appoint Main Adviser Main Adviser & other professional& other professional
–main coordinator for the listing, due diligence (DD), main coordinator for the listing, due diligence (DD),
communicate with authorities, marketing & underwriting.communicate with authorities, marketing & underwriting.
•Commence DD (Accountant ensure acc in order, legal Commence DD (Accountant ensure acc in order, legal
adviser – Co Act 65 & Cap Market Service Act 07etc)adviser – Co Act 65 & Cap Market Service Act 07etc)
•Pre-listing restructuringPre-listing restructuring
•Determine co/Group valueDetermine co/Group value
•Prepares for submissions & other docPrepares for submissions & other doc

13. TimeframeTimeframe
AuthoritiesAuthorities
•2 - 3 months2 - 3 months
•Submission to authorities:Submission to authorities:
•SC (protecting minority)SC (protecting minority)
•FIC (recommend SC on national aspect of acquisition)FIC (recommend SC on national aspect of acquisition)
•MITI (Bumiputera, MITI licenses & equity conditions)MITI (Bumiputera, MITI licenses & equity conditions)
•Bursa Securities (maintain efficient, secure & active Bursa Securities (maintain efficient, secure & active
trading market)trading market)
•MOF, & other authorities.MOF, & other authorities.

14. TimeframeTimeframe
Registration & MarketingRegistration & Marketing
•2-3 weeks2-3 weeks
•Registration & MarketingRegistration & Marketing
•Register & lodge Register & lodge prospectus prospectus with SC with SC
–Detail listing scheme (info, bus overview & audited results Detail listing scheme (info, bus overview & audited results
& financial forecast)& financial forecast)
•Roadshows to institutions & foreign investorsRoadshows to institutions & foreign investors
•Commence Commence bookbuildingbookbuilding exercise (price discovery exercise (price discovery
mechanism based on demand from institutional mechanism based on demand from institutional
investors) investors)
•Finalize pricingFinalize pricing

15. TimeframeTimeframe
ListingListing
•1 - 2 weeks1 - 2 weeks
•Offer closesOffer closes
•Listing & QuotationListing & Quotation
–Your company is now officially a Public Listed Your company is now officially a Public Listed
CompanyCompany
–Shares of your company are freely tradable on the Shares of your company are freely tradable on the
stock exchange.stock exchange.

16. What Investors Are Looking ForWhat Investors Are Looking For
1. Your Business1. Your Business
2. Corporate Strategy2. Corporate Strategy
3. Corporate Management3. Corporate Management

17. What Investors Are Looking ForWhat Investors Are Looking For
1. Your Business1. Your Business
Establish track recordEstablish track record
Market reputationMarket reputation
Viable business with good growth prospectsViable business with good growth prospects
Quality assets, goodwill and branding Quality assets, goodwill and branding
R&D capabilitiesR&D capabilities
Competitive pricingCompetitive pricing
Establish customer & supplier baseEstablish customer & supplier base
Quality accreditationQuality accreditation
Sustainable competitive edgeSustainable competitive edge
Healthy balance sheetHealthy balance sheet
Good cash flow management.Good cash flow management.

18. What Investors Are Looking ForWhat Investors Are Looking For
2. Corporate Strategy2. Corporate Strategy
Execution & acquisition strategy Execution & acquisition strategy
Ability to move up the value chain Ability to move up the value chain
CAPEX investmentCAPEX investment
Dynamic capital managementDynamic capital management
Attractive dividend policyAttractive dividend policy

19. What Investors Are Looking ForWhat Investors Are Looking For
3. Corporate Management3. Corporate Management
Qualified & experienced managementQualified & experienced management
Transparent boardTransparent board
Risk management skill & internal Risk management skill & internal
controlcontrol
Good corporate governance & Good corporate governance &
execution skills.execution skills.

20. Case Study Case Study
Transmile Group BerhadTransmile Group Berhad
A Listed company problemA Listed company problem
Feb 15: Board approved accounts and Feb 15: Board approved accounts and
release results to Bursa Malaysia.release results to Bursa Malaysia.
May 3 Bursa Malaysia rejected.May 3 Bursa Malaysia rejected.
Issues: Issues:
a. Managementa. Management
b. Auditb. Audit
c. Role of directorsc. Role of directors
d. Share priced. Share price

21. THE END