Encouraging SMEs to list in the LEAP MARKET – Cheng & Co

Bursa Malaysia’s Leading Entrepreneur Accelerator Platform (Leap) Market was officially launched on 25 July 2017 as an alternative efficient funding platform for SMEs. This development is the first of its kind in the ASEAN Region.

On 5 October 2017, Cheng & Co co-organised a conference on “The Pathway for SMEs Toward Listing – Preparation and Challenges” with the Federation of Malaysia Chinese Guild Association. The response was great with more than 150 SME business owners attending. Ms Hanita Othman, the Vice President, Primary Market, Listing Development Bursa Malaysia was one of the guest speakers and shared her extensive experience and in-depth knowledge about the listing opportunities on Bursa Malaysia.

Packed Hall During The Leap Market Event
Packed Hall During The Leap Market Event

In Malaysia, SMEs currently represent 97% of business establishments and accounts for more than 52% of total employment.

At present, SMEs in Malaysia are too reliant on financing from banks which makes up almost 96% of their funding, with just 4% from capital market. This has limited their growth and business expansion due to the need for security back-ups, where financing from banks are concerned, which has often deterred SMEs, especially those that are service-based, due to the lack of tangible assets back up from obtaining funds to enhance their business activities.

Current Fund-Raising Options:

  • Angel Investors – investors expecting high returns
  • Venture Capitalists – difficult to raise funds due to having to go through a thorough assessment process
  • Bank Financing – requires strong credit and collaterals
  • Crowdfunding – does not usually satisfy large capital requirements

Why Go For Listing?

Key reasons to go for Listing (IPO):

  • To raise funds for financing your business and expansion plans
  • To grow your business
  • As an exit strategy (fully / partly) for investors

Why LEAP Market is a Hot Topic Among SMEs

The LEAP Market is Malaysia’s third capital market in addition to the Main Market and ACE Market. The key benefits of the LEAP Market compared to the other two are:-

  • Cost Effectiveness
    • Based on data between 2012 to 2015, the average cost of raising capital from the initial two Markets range from RM2 million to RM3 million. It will now be much lower with the LEAP Market, which is estimated to be below RM1 million mainly due to the lower barrier of entry.
  • The Leap Market does not require a profit track record.
    • Its works on light touch basis balanced with prudent standards.
  • Waiver of Initial Listing and Processing Fees
    • For those listed on the LEAP market, if they graduate within three years to the ACE market, the initial fee and processing fee for the listing will be waived.
  • A funding platform for all industries.
    • The LEAP market is open to all industries as long as they display good potential for business growth. The LEAP Market also acts as a springboard for SMEs with plans for listing but not necessarily fulfilling the listing criteria which requires funding for business expansion. It provides a path for SMEs to enter the capital market and lay the foundations for future listing on the ACE or Main Market once they have fulfilled the listing conditions.

A Platform for Businesses to Move Up To A Higher Level

Listing provides businesses with not just a funding platform, but also allows business owners to grant ESOS (employee share option scheme) to their employees which is a great way to reward excellent and committed performers for their invaluable contribution to the growth of their organisation.

Companies embarking on Mergers and acquisitions too will realise the benefits of being listed on the LEAP market as they will be able to offer shares instead of paying cash in full, in their bid to acquire another company. This creates greater synergy for the business and makes business expansion a lot easier.

Cheng&Co CEO interacting with participants

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