INTRODUCTION
The business environment is dynamic with opportunities always available to businessmen who have the adequate level of capital not only to sustain its daily operational requirements but more importantly, be able to capitalise on such opportunities to create value for all stakeholders.
One of the options opened to any business is to tap the capital markets for funds to support its growth initiatives be it through organic means or via mergers and acquisitions. An initial public offering (IPO) is an option to position the business to tap funds from the capital market, given that cost of funds are cheaper with more avenues to raise capital compared to sourcing of financing from the traditional channels where personal guarantee is normally the norm.
A listed company with its inherent benefits such as, perceived to be more transparent, visible to all stakeholders and acting as a barometer for the worth of the business can be tapped further to scale the business higher by exploiting the capital markets for additional funds or even use the listed securities as an option to finance mergers and acquisition.
This article is intended to give you an option to consider listing your business on the Main Market in Malaysia and Hong Kong.
Should you have any query, we would be most pleased to address them.
THE LISTING REQUIREMENTS
A brief comparison on the listing requirements between Malaysia and Hong Kong.
Malaysian IPO (Main Market) (“MIPO”)
(A)
Financial Requirements
|
| 1. |
Profit
Test |
(a)
Profit after tax (“PAT”) of at least RM20 million in the
last 3 to 5 financial years; and
(b) PAT of at least RM6 million for the most recent full financial year |
| 2. |
Market
Capitalization Test |
(a)
Upon listing total market capitalization of at least RM500 million; and
(b) Generated operating revenue for at least 1 full financial year prior
to submission |
| 3. |
Market
Capitalization, Revenue and Cashflow Test |
(a)
Not applicable in Malaysia |
| 4. |
Infrastructure
Project Corporation Test
|
(a)
Right to build and operate infrastructure project, with project costs of
not less than RM500 million; and
(b) Remaining concession period of at least 15 years |
(B)
Operating History and Management Requirement
|
| 1. |
With
an identifiable core business which it has majority ownership and management
control |
| 2. |
At
least 3 full financial years of continuity of substantially the same management |
| 3. |
Applicant
under the Capitalization Test must be able to sustain the same management
since the commencement of operations (if less than 3 full financial years) |
|
|
| 1. |
At
least 25% of total listed shares (excluding treasury shares) must be held
by public |
(D)
Spread of Shareholders
|
| 1. |
Minimum
of 1,000 public shareholders holding not less than 100 shares each |
| 2. |
On
best effort basis allocate to Bumiputera investors 50% of the public spread
requirement |
Hong
Kong IPO (Main Board) (“HKIPO”)
(A)
Financial Requirements
|
| 1. |
Profit
Test |
(a)
PAT of at least HK$50 million in the last 3 financial years; and rofit after
tax (“PAT”) of at least RM20 million in the last 3 to 5
financial years; and
(b) PAT of at least HK$20 million for the most recent full financial year |
| 2. |
Market
Capitalization Test |
(a)
Upon listing total market capitalization of at least HK$4 billion; and
(b) Total revenue of at least HK$500 million for the most recent audited
financial year |
| 3. |
Market
Capitalization, Revenue and Cashflow Test |
(a)
Total market capitalization of HK$200 million upon listing; and
(b) Total revenue of at least HK$500 million for the most recent audited
financial year; and;
(c) Positive cashflow from operating activities of at least HK$100 million
in aggregate for the 3 preceding financial years |
| 4. |
Infrastructure
Project Corporation Test
|
(a)
Right to build and operate infrastructure project, with project costs of
not less than HKD1 billion; and
(b) Remaining concession of at least 15 years |
(B)
Operating History and Management Requirement
|
| 1. |
Ownership
continuity and control for at least the most recent audited financial year |
| 2. |
At
least 3 preceding financial years of management continuity |
| 3. |
Applicant
under the Market Capitalization and Revenue Test, the Stock Exchange of
Hong Kong Limited (“HKEx”) will accept a shorter trading
record period if the directors and management have sufficient and satisfactory
experience of at least 3 years of business and industry of the applicant
and the new applicant has management continuity for the most recent audited
financial year
|
|
|
| 1. |
At
least 25% of the issuer’s total issued share capital must at all times
be held by the public |
| 2. |
Where
expected market capitalization is over HK$10 billion upon listing, HKEx
may accept a lower percentage in between 15% and 25% |
(D)
Spread of Shareholders
|
| 1. |
Minimum
300 public shareholders |
| 2. |
Not
more than 50% of the securities in public hands upon listing |
As a summary to the above, the listing requirements for MIPO and HKIPO is relatively similar, save as disclosed below:-
(A) Financial Requirement
(1) marginally higher PAT requirement for HKIPO and a shorter track record period;
(2) market capitalization, revenue and cashflow test is only applicable to HKIPO.
(B) Operating History and Management Requirement
(1) MIPO requires an identifiable core business which it has majority ownership and management control, whereas HKIPO requires ownership continuity and control for at least the most recent audited financial year;
(2) in addition to the management continuity which is applicable to both the MIPO and HKIPO, for applicants under the Market Capitalization and Revenue Test HKEx will accept a shorter trading record period if the directors and management have sufficient and satisfactory experience of at least 3 years of business and industry of the applicant.
(C) Public Float
(1) HKEx may accept a lower percentage in between 15% and 25% if the expected market capitalization is over HK$10 billion upon listing;
(D) Spread of Shareholders
(1) MIPO requires a minimum of 1,000 public shareholders holding not less than 100 shares each, whereas HKIPO only requires a minim of 300 public shareholders;
(2) it is on the best effort basis to allocate 50% of the public spread to Bumiputera investors for MIPO, whereas HKIPO has no such requirement.
Apart from the abovementioned, there are certain flexibility in respect of listing of mineral companies in HKEx (for further information, please refer to our article “LISTING OF MINERAL COMPANIES IN HKEx”).
Above are the key considerations to be taken into account upon deciding your listing destination.
CONCLUSION- WHY HONG KONG THE VENUE OF CHOICE?
HKEx is one of the largest stock exchanges in the world, has successfully raised a total equity funds amounted to approximately HK$936 billion in 2014. As of 31 December 2014, HKEx (including the Main Board and GEM) has 1,752 listed companies with an aggregate market capitalisation of over HK$25 trillion.
Hong Kong is strategically placed in a high growth region and providing an ideal platform for issuers to achieve exposure in the investors pools of the rapidly growing People’s Republic of China.
Apart from the aforesaid, it is important to highlight on the advanced clearing and settlement infrastructure in Hong Kong. The Hong Kong Monetary Authority’s US Dollar Clearing System allows financial institutions in Hong Kong to settle US dollars transactions real time in the Asian time zone against the delivery of HK dollars and thus reduces the foreign exchange settlement risk caused by the time gap between the settlement of HK dollars and US dollars.
The development of the new Listing Rules for mineral companies via Chapter 18, together with the proximity to resource markets, has undoubtedly increased the interest of the mining sector towards HKEx.
Below are inter alia, companies with Malaysian assets and operations which have been listed in HKEx:
1. Media Chinese International Limited (Stock Code 685)
2. Tan Chong International Limited (Stock Code 693)
3. CVM Minerals Limited (Stock Code 705)
4. Genting Hong Kong Limited (Stock Code 678)
5. V.S. International Group Limited (Stock Code 1002)
6. Parkson Retail Group Limited (Stock Code 3368)
7. CAA Resources Limited (Stock Code 2112)
8. Nirvana Asia Limited (Stock Code 1438)
