What is the ACE Market?

Bursa Malaysia ACE-Market

The ACE Market which stands for ‘Access, Certainty, Efficiency’ is actually the new name for the formerly known MESDAQ (Malaysian Exchange of Securities Dealing and Automated Quotation) market. MESDAQ came into existence in 1997 when it was the home of mainly technological stocks and today it is replaced by the ACE Market under Bursa Malaysia. The ACE Market was derived together with the unification of the Main and Second Board into the Main Market of Bursa Malaysia in 2009.

The ACE Market is seen as the ideal market for start-ups and new companies which are run by entrepreneurs who are looking to push for more capital by listing their companies public. This is where they might not have the large and high amount like companies in the Main Market but would probably have a strong product or service portfolio which if given more capital, would surely succeed.

Used to be MESDAQ

The ACE Market is very much like the GEM (Growth Enterprise Market) in Hong Kong or Catalist of Singapore and companies in ACE Market are sponsor-driven and it is not only limited to the technology sector when it was called MESDAQ.

This means that companies from any sector or size can apply to be listed in the ACE Market where it is designed to offer a more efficient and certain way for you to do so. Typically, the regulations for listing in ACE market are less stringent and the company need not provide the track records like how it is required in the Main Market.

Easier Rules in getting listed

The regulatory framework of the ACE Market is to offer companies and entrepreneurs with better transparency and hence makes it easier to list. Such is the objective of this market where the whole idea is to encourage more innovative technology and products and companies to push for development and growth. Entrepreneurs would be encouraged to offer better products and services where there is now an option to try and inject more capital into their company for the development of their offerings. This in return will provide investors with the opportunity to start investing in SMEs (small and medium enterprises) which might not be technology based.

Listing requirements in the ACE Market

If you intend to have your company listed in the ACE Market, there are several factors that must be considered. First, there is the suitability for listing issue. This is where Bursa Malaysia will rely on the Sponsor and then review the proposal of the company. This is where the company:

  1. Should have some form of potential in growth through the industry your business is in
  2. Have a sound team of management with appropriate expertise and qualification
  3. Has the suitable policies and procedures in place as well as adhering to the laws and regulations
  4. Has a Board of Directors who are capable and aware of their duties
  5. Is aware of the risks involved with a sound risk management plan
  6. Has a good track record of good corporate governance

Factors for listing

In recent years, there has been a lot of criticisms about the ambiguity of listing for companies in the ACE Market. Bursa Malaysia, in the effort to be more transparent about this, has changed the requirements and made them more understandable. One such move took place in 2017 when it was announced that the regulations to be listed in the ACE Market is not the same as the Main Market where it is all about profitability.

What makes this very interesting is that, companies that intend to get listed in Bursa Malaysia’s MAIN Market would usually need to provide their accounts to be evaluated before they are approved. In fact, any company with poor (or that which is not good enough) financial performances would not even be considered for the MAIN Market. If such strict guidelines are implemented for the ACE Market, then many companies will not make such considerations. The creation of the LEAP Market was only intended for SMEs and would not help industry-specific companies that did not qualify for the ACE Market.

In fact, some loss-making companies or those with low profitability could be approved to be listed in the ACE Market if it is an innovative business in the R & D or IT industry. It must, however, show efforts to improve the financial performance and a sound strategy to get there.

The major issue is from the Sponsor which is usually the investment bank or some other financial engine. This is to accommodate certain companies in long-term industries like biotechnology or new technologies. In such cases, regulatory or investment periods might take a longer time. This means that the company might experience losses in the first few years but would still need to inject funds to continue its business. Besides that, the moratorium requirements have been modified for ACE Market companies to be ‘promoted’ to the Main Market.

How prepared is a company to be listed in the ACE Market?

For any business to be listed in the ACE Market, there are considerations that must be taken into account. The most crucial one is to ensure that such a move is going to benefit the objectives and intentions of the company’s stakeholders. After all, it simply means that the company will become a publicly-shared business where the owners no longer enjoy the total autonomy of their business.

Besides that, there will be a lot of money invested in ensuring the company gets approved for listing. To get to that point, it will mean opening up the accounts to auditors and then being scrutinized by the authorities. A lot of transparency will be needed. That will mean engaging lawyers, accountants, auditors, tax advisors if required, Public Relations and many others.

What is the Main Market?

The Main Market in Bursa Malaysia is actually a combination of the former Main and Second Board companies. Today, companies which was previously listed under the Main and Second Board of the then Bursa Saham Malaysia are all coined in the Main Market. This was made through a unification process which took place in August 2009.

Streamlining public listed companies

The reason this exercise was carried out was to streamline all the processes, rules and regulations for companies to be listed in one market where it would help to lower costs of regulation as well as to provide shorter time-to-market duration. Basically, if you are trading shares through the main companies in Malaysia, you will be trading through the Main Market. The other market in Bursa Malaysia is known as the ACE market which is more industry specific.

What is the Main Market exactly?

The Main Market in Bursa Malaysia is where companies list their shares for trading and you will find the likes of MAS, AirAsia, Petronas and others. Under the Listing Requirements (LR), the company must ensure that at least 25% of its total shares issued are spread for public shareholders. Generally, the Main Market is where most share investors try to earn their profit by buying and selling of the respective companies’ shares.

Operational hours

The Main Market is part of the 2 markets under the Securities Market of Bursa Malaysia where it currently holds 823 companies. Under the Main Market, products such as shares, REITs, ETFs, Warrants and such are traded on weekdays from 9am to 5pm apart from public holidays. Pre-opening hours start from 8.30am to 9am and from 12.30pm to 2.30pm is the midday break. 4.45pm to 4.50pm is the pre-closing session while last trading in the Main Market starts from 4.50pm and the market closes at 5.00pm.

The FBM-KLCI

At the end of each day, the performance of the 30 largest companies grouped by their full market capitalization on the Main Market will determine the FTSE Bursa Malaysia KLCI Index or FBM KLCI which will give you an overall sentiment on how the market fared for that particular day. this was previously known as the KLCI Index since the unification of the 2 boards.

Listing the company on Bursa Malaysia

A lot of homework must be carried out if you want to have your company listed in the Main Market of Bursa Malaysia. While you might want to consider employing a professional consultant to get your company there, perhaps one of the most influencing factors would be in the dollars and sens. Here are some that you might be interested to know.

Basics of getting listed

There are several important issues that you must know and consider before getting your company listed. Among them, you should have either one of the following:

  1. The company must have a market capitalization of more than RM500 million after listing. Besides that, there must be a one-full year of revenue generated
  2. A project that the company has secured (and confirmed). Here, the company would be given the right to build or operate some form of infrastructure either locally or abroad which costs more than RM500 million
  3. A profit after tax with the aggregate of over RM20 million continuously for 3 to 5 years. The latest profit after tax meanwhile must be over RM6 million

The Criteria

As for the criteria, the company must:

  1. Have at least 1,000 shareholders
  2. At least 50% of the shares are allocated for Bumiputera shareholders
  3. Not have any accumulated losses in shareholders equity while cash flow is positive from overheads and operations
  4. Have sufficient working capital of at least 1 year
  5. Have the same management in the company for 3 years or more
  6. Operating a core business which is not a holding investment firm for another public listed company

What about payments

To get the company listed in the Main Market, be prepared to incur costs. This includes:

  1. Application fee: RM80,000. This is not inclusive of the 0.01% of the market value of listed securities
  2. An initial listing fee: 0.01% of the issued capital market value or a minimum of RM20,000 and capped at RM200,000.
  3. Prospectus Registration: RM15,000
  4. 1 to 3% of the value of shares to be paid as Underwriting, Placement and Brokerage fees
  5. Other fees: This includes auditors, professional services, consultancy and others which differ among parties

Bursa Malaysia Listing Requirements

The gradual growth of any company would eventually to go public or towards the IPO (Initial Public Offering) path where you will be able to inject more funds into the company through the issuing of shares to the public. It is only natural that in order for the company to grow, additional capital and funds would be necessary to move forward or the company would pretty much be dormant after a while.

So what does it take for your company to obtain listing in Bursa Malaysia, the Malaysian bourse? First and foremost, you have to decide which market you would like to list in and this is very much influenced by the nature of your company and the products and services it offer.

Main market and Ace Market

There are 2 markets in Bursa Malaysia, the first being the Main Market which is the best and most common avenue for companies to raise funds. The Main Market is populated mainly by established companies and this is where you will find the largest companies in Malaysia like Malaysian Airlines, Air Asia, Petronas and the likes trading their shares there.

On the other hand, the ACE Market provides an alternative sponsor-driven market and it is an ideal platform if you are a company with great potential development and growth. You will find that the ACE Market offers a great opportunity for companies which are growing to propel their business to higher ground in order to establish better financial standings in all business sectors. From here, it is only natural that the ACE Market Company continue to grow and eventually move into the Main Market.

A company that wants to apply into any of the market would have specific criteria that need to be met before it gets into public. In comparison, the requirements between listing in the Main and ACE Markets differ considerable much.

Basically, the most important factors of listing in Bursa Malaysia is to be able to prove that the company is growing positively and that it is ready to develop further.

RM500 million totals in market capitalisation

To get listing in the Main Market, your company must provide a profit figure and uninterrupted profit after tax or PAT of 3 to 5 full financial years with an aggregate of a minimum of RM20 million and a minimum of RM6 million PAT in the latest full financial year. On top of that, the company must also fulfil the Market Capitalisation Test where there the company must be able to offer a minimum of RM500 million totals in market capitalisation once it goes public and incorporated and generated operating revenue of 1 full financial year before submission for listing. On top of that, the company must also provide details for the Infrastructure Project Corporation Test where it must show that it has the ability and right to construct an infrastructure project in or outside the country with a minimum of RM500 million in project cost.

On the other hand, if your company is planning to list in the ACE Market, there are no minimum operating track record or profit requirements needed.

Post IPO

Once the company goes public, both the markets would require the company to issue a minimum of 25% of the company’s share capital to the public. Main Market companies would require at least 1,000 public shareholders who must hold at least 1000 shares each while ACE Market companies would be required to have at least 200 public shareholders with at least 100 shares.

On top of that, there are also requirements for Bumiputera Equity where Main Market companies would need to allocate at best effort basis 50% of the public spread to investors who are of Bumiputera status. There are no such requirement for ACE Market companies upon initial listing. However, the companies are required to allocate at its best effort basis to allocated 12.5% of its enlarged issued and paid-up share capital to investors of Bumiputera status either within a year of achieving the profit track record of the Main Market or after 5 years of listing in the ACE Market whichever comes first. This Bumiptera Equity Requirements is applicable to all companies in Bursa Malaysia while exemptions are applied for companies which holds the BioNexus and MSC Malaysia statuses respectively. Companies with predominant foreign-based operations are also exempted from this requirement.

About Bursa Malaysia

First established in 1930 under the Singapore Stockbrockers’ Associatoin, the Malaysian branch re-registered in 1937 called the Malayan Stockbroker’s Association. It was until 1960 that the Malayan Stock Exchange was established which then started the public trading of shares and four years later saw the establishment of the Stock Exchange of Malaysia and then further changes was made for it to become the Stock Exchange of Malaysia and Singapore after Singapore left the country to form its own government.

With the cease of the interchangeability of the currency between Malaysia and Singapore in 1973, the stock exchange became further divided into the Kuala Lumpur Stock Exchange Berhad and the Stock Exchange of Singapore.

After that, in 1976, the Kuala Lumpur Stock Exchange Berhad took control of operations of the Kuala Lumpur Stock Exchange before the name was changed to Bursa Malaysia Berhad in 2004 and was listed in the Main Board of the Bursa Malaysia Securities Berhad in March 2005. Bursa Malaysia is he exchange holding company that operates the exchange, and related services in the stock exchange. Its subsidiaries include Bursa Malaysia Securities Bhd, Bursa Malaysia Derivatives Bhd, Bursa Malaysia Securities Clearing Sdn Bhd, Bursa Malaysia Derivatives Clearing Bhd, Bursa Malaysia Depository Nominees Sdn Bhd, Bursa Malaysia Securities Bhd, Labuan International Financial Exchange Inc., Bursa Malaysia Depository Sdn Bhd, Bursa Malaysia Information Sdn Bhd and Bursa Malaysia Bonds Sdn Bhd.

It remains as one of the biggest bourses in Asia, holding almost 1000 companies that offer all types of investment related services in the Main Board, Second Board and the MESDAQ Market.

REITS

REITS

The REITs segment of Bursa Malaysia are basically counters that are made up of real estate investment trust counters. These are usually made up of companies which are primarily involved in the property and real estate development sectors. Generally, REITs (Real Estate Investment Trust) are tax designation used by a corporation which are investing in the area of real estate and this is done to help them reduce their corporate taxes. The companies would then have to distribute back their taxable income back to the investors usually involving some 90%. Typically, it is very similar to that of mutual funds which are normally practiced with normal stock companies.

In Malaysia, REITs are traded in the Bursa under several counters that include AHP, AMfrist, Atrium, BSdreit, Hktar, Stareit, TWRREIT, UOAreit, Sunreit, QCapita, CMMT, Axreit and ALQAR. These stocks are usually considered a bit more tricky if you are planning to invest in them as compared to other categories hence you will need to rely on, at most times insider news and insights of these counters before buying the shares. Discuss them with other members here about whether it is wise and sound to invest in any counter or provide your experiences for others to learn from here.

What is Real Estate Investment Trust (REITs)?

Real Estate Investment Trust or in short REITs are basically a type of trust fund which usually involves companies pooling money from its investors and shareholders and then using an accumulated amount, invest them into real estate assets which could be any type of property in the real estate sector. As the amount is very high, the fund managers would be able to invest in larger property projects like residential or commercial buildings, industrial or retail lots and any other type of real estate properties. Basically, REITs is a form of passive investment vehicle which will buy real estates which will generate income and it is seen as one of the most stable and consistent income for its unit holders.

This is because funds in REITs are channelled into the property market which is known to be one of the most stable sectors and then from there, the profit is generated through the rental generated from the real estates. Current regulations require at least 90% of the income generated through REITs be channelled and distributed back to its unit holders.

Under Bursa Malaysia, among some of the largest REITs include Sunway REIT which came with a fund size of 2.78 billion units when it was first listed and at RM0.97 sen. Other REITs traded under Bursa Malaysia include Amanah Raya REIT, AmFirst REIT, Axis REIT, Starhill REIT, UOA REIT, Quill Capita REIT and Atrium REIT and quite obviously, they are commonly property developing parties.

Why should you invest in REITs?

Investing in REITs have its advantages where it supposedly could yield a stable and recurrent income as that is the very nature of its profits. Unless there is a crisis in the property market, REITs are considered to be very stable as rental will continue to be imposed and this is one market which is deemed to be more resilient even during an economic downturn. Furthermore, when at least 90% of the income from REITs is distributed back to the unit holders, it provide a stable and consistent benefit that unit holders can enjoy.

Diversification is one of the main attractions of REITs where they are usually invested in different geographical real estate locations and this avoids the ‘putting all eggs in one basket’ mentality. By pooling together a large amount of funds, the REIT managers would be able to buy larger units and more marketable property in different locations which means that it will be more profitable in many ways. It will consequently reduce the negative effects often associated with holding assets from one single location. On top of that, REITs are managed by fund managers which are usually professionals and experts in the property development sector. As mentioned earlier, most REITs are usually managed by companies which are property developers in nature.

When needed, REITs can be sold quite quickly if the fund manager finds or discovers new or better investment opportunities. This is because unlike the conventional real estate ownership which are often difficult to liquidate, REITs are typically more liquid assets. One of the contributing factors to this is because REITs are typically listed and traded units on Bursa Malaysia. Investors of REITs would also enjoy the affordability of this investment because you are basically investing in property without the being the sole owner of the lot. Basically, it is different where you are not required to have a large capital in order to invest. Apart from that, you also need not have to undergo the whole documentation process of agreements, stamp duties or lawyer fees which are imposed in the standard procedures of buying property. Your investment is also well protected and thereby ensuring that they are safe because REITs operating under Bursa Malaysia is governed by the Securities Commission Act 1993, the Guidelines on Real Estate Investment Trusts and the Guidelines on Islamic Real Estate Investment Trusts, which means that your interests are protected.

However, this does not mean that REITs are all profit and no risk because there is bound to be risks in every investment method. Under certain circumstances, the ability of the REITs to make proper distributions could be affected when some real estates do not generate enough or sufficient cash flow or net operating profit. This is particularly so during economic downturns when rentals might be harder to come by.

The total return of REITs are usually subject to the performance of the current property market and hence, although you might enjoy a stable income, it is by no means guaranteed and although not common, if the properties drop in value, the unit price of the REIT might follow suit. As an investor, you have no direct control over the investment decisions, how they are managed and such and as per any other investment methods, the market factors will play an important role of the demand and supply. You will find that the volatility and fluctuations of the market would surely affect the performance of REITs which will also involve its other risk factors.

Properties

PROPERTIES

With new projects being announced by the government and new developments in around Malaysia, property prices have been very dynamic recently. The property development companies too have been very active where they are constantly embarking on new property and real estate developments around Malaysia.

In this category, you will find a list of some of the most established property developers in Malaysia. Here is where you will be able to buy and sell shares of companies like A&M, Bolton, Daiman, GMutual, KSL, Naim and such. Other more established developers listed in this category of Bursa Malaysia include IGB, IJM Land, Equine, Glomac, OSK Properties, SP Setia, UOA Development, UM Land as well as YTL Land. Share prices of these companies are very active and at certain times very volatile as there are always new developments and announcements made by the government of Malaysia which are aimed at benefiting the people and the society at large.

Should you have any information or insider news of upcoming projects which will surely change the outlook and prices of the shares of these companies, you can share them with other members here. This is where you will be able to benefit from the information before buying your shares.

Industrial products

Industrial_products

The Industrial Products category in Bursa Malaysia has the most counters as compared to other categories. It is made up of companies operating in Malaysia which are basically involved with all types of products and services encompassing oil and gas, steel industries, wood industries, packaging and many more. Here is where you will find counters like Wijaya which is involved with healthcare and operates one of the major specialist hospitals in Malaysia, MinTEc, Ingress, Jasa Kita, BTM and others.

Companies from Malaysia as well as multinational ones with their subsidiaries here in Malaysia have their stocks traded in this category and you will be able to find all types of companies that also covers Kinsteel, Leweko, Lion group, Maemode, Mieco, CSCStel as well as as Adventa too.

Share with others any insights and upcoming project information here and you will find that you will get more sound investments and better returns of your money when trading these shares. The counters here are considered to be among the more active ones among all other counters. This is because there are many counters operating in this segment which are major companies in Malaysia that also include Jadi, DRB HICOM, CinWei, White Horse ceramics, and SCOMI.

Hotels

HOTELS

The hotels segment in Malaysia’s Bursa Main board constitutes the smallest segment of counters because there are only 4 companies whose shares are traded here. This is where you will find that while the companies are listed under the Hotels category, they are also involved with other related services although their main priority are still in their hotel businesses.

Take note that not all the main hotel companies are listed in within this category because companies like IOI who operates a chain of hotels and resorts in Malaysia are listed under their main business category which is in the plantations sector.

Here is where you will find companies like GCE which is Guthrie’s subsidiary, Landmark Holdings which operates the Andaman hotels and resorts, PMHoldings as well as Shang the owner and operator of Shangri-La hotels and resorts around the country and surrounding regions.

You can now share insider news if you have any with other members of the club here where you will also be able to receive very valuable insights into upcoming contracts and developments of these companies in around Malaysia. Such information will be able to help you in your investments especially if you are considering to trade the stocks from these operators.