Poor responses and strict rules are among reasons which have pushed local tech start-ups to countries like Singapore to gain capital funding, and to Australia for public listing, The Malaysian Reserve reported today.
Such companies include iflix — a video streaming service headquartered in Kuala Lumpur — which is reported to be working towards listing on either Australian Securities Exchange (ASX) or the New York Stock Exchange.
The move could reportedly earn a value of RM4.19 billion (US$1 billion) to the company.
Another company that started in Malaysia but is now Singapore-based, PropertyGuru Ltd released its prospectus earlier this month, ahead of a planned initial public offering (IPO) on ASX that could raise some RM1.03 billion (A$363 million), the business daily reported.
The Malaysian Reserve also reported that local tech start-ups have chosen Singapore to gain access to a larger venture capital funding and a lower corporate tax, and named ride-hailing company Grab as example.
Grab started out in Malaysia where it was initially called MyTeksi, and is now headquartered across the Johor Strait in Singapore.
“Malaysian investors tend to feel that a proven track record is more important when investing in a company,” Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew was quoted saying by The Malaysian Reserve.
He claimed the investor base in Malaysia is not so receptive of tech-based start-ups, which typically rely on a different kind of business model than investors are used to.
Pong claimed that the companies listed on Bursa Malaysia’s Leading Entrepreneur Accelerator Platform (LEAP) which, despite presenting interesting opportunities, have not received recognition from investors.
He said these companies do not have the track records of the more established firms, but they have promising business models.“Investors stand to lose out from the potential value that tech-based start-ups provide,” Pong told the newspaper.
The LEAP market was introduced by Bursa Malaysia in 2017 was aimed at providing alternative fundraising platform for small and medium enterprises (SMEs) that would otherwise be ineligible for a listing on the main or secondary markets.
JF Apex Securities Bhd head of research Lee Chung Cheng said a company may opt to list in a market where it already has some business exposure.
According to Lee, the trend of local start-ups looking to a list in Australia is relatively new as companies historically turned to Singapore and Hong Kong stock markets.
Like Pong, Lee claimed the Malaysian stock market is not at all receptive to tech-based start-ups as investors are not very used to the idea even as he acknowledged the ASX policy allowing the listing of companies that have yet to prove themselves profitable plays a role in attracting such firms there.
“Malaysian investors tend to feel that a proven track record is more important when investing in a company,” Lee was quoted saying.
There are currently 11 Malaysian start-up firms, mostly tech-related that are being traded on the Australia exchange.
These include four companies under the Catcha Group such as iProperty Group Ltd (now trading under REA Group Ltd) and iCar Asia Ltd.
If iflix is to be listed on the ASX, it will be the fifth company under the Catcha Group.
Pong added there are several reasons a local company would consider listing abroad including securing a bigger profile in a major market and tapping into business connections in those markets.
Other reasons include securing better valuations and seeking out a more liquid trading environment, not to mention a more attractive tax environment, he added.