KUALA LUMPUR (Sept 15): Mercury Securities Group Bhd, controlled by Chew Sing Guan, a veteran of the stockbroking industry, has been the principal adviser for many initial public offerings (IPOs) over the decades.

But come next Tuesday (Sept 19), the securities and corporate finance (CF) advisory firm will be celebrating its own listing as it becomes the first local stockbroker in two decades to float its shares.

Incidentally, its market debut comes on the heels of its closest competitor — M&A Securities Sdn Bhd — getting a listing status via a reverse takeover of SYF Resources Bhd, which has now been renamed M&A Equity Holdings Bhd. Mercury Securities' listing was only realised 29 months after its failed merger with JF Apex Securities Bhd, a stockbroking firm founded by the late Chan Guan Seng.

In an interview with The Edge, Chew, who is managing director of Mercury Securities, said the firm had in April last year decided to pursue an IPO on its own.

The timing of the listing couldn't have been better for Mercury Securities, as the outlook for IPO on Bursa Malaysia remains encouraging, with the stock exchange saying in July it would be maintaining its 2023 target of 39 IPOs — the highest since 2006 — with 23 companies expected to launch their IPOs in the second half of this year.

The group, whose financial year ends on Oct 31, saw its net profit jump 74.7% to RM17.20 million in FY2020 from RM9.85 million in FY2019. Earnings grew further to RM20.26 million in FY2021, before easing to RM17.66 million in FY2022 — according to the group's prospectus.

On Thursday, the group reported a net profit of RM8.81 million for the first nine months of its FY2023 on a revenue of RM18.7 million. The stockbroking segment contributed 72.50% of the group’s revenue for the cumulative quarters under review, while corporate finance contributed the rest, its bourse filing on Sept 14 showed. 

According to Chew, IPOs are more lucrative than other corporate exercises like rights placements or private issuances. And to maintain its earnings momentum, Chew said it needs three to four IPOs a year, with each having a market capitalisation of between RM150 million and RM250 million.

This year, it has so far helped with the listing of MYMBN Bhd in July. In 2022, Mercury Securities facilitated five IPOs: Senheng New Retail Bhd, Cosmos Technology International Bhd, PT Resources Holdings Bhd, CC International Bhd and Snowfit Group Bhd.

Mercury Securities has three other IPOs in the pipeline this year, Chew said. One is Evergreen Max Cash Capital Bhd, which is slated to be listed on the ACE Market of Bursa Malaysia on Sept 26, 2023. Another is Smart Asia Chemical Bhd, which just released its prospectus exposure last week. The third cannot be disclosed at the moment, he said.

The market, which has seen over 30 IPOs annually in recent years — Bursa Malaysia recorded 30 IPOs in 2021, and 35 in 2022 — is more vibrant compared to the past, and should bode well for the group, Chew said.

As for Mercury Securities’ capacity to pick up more IPO exercises, Chew cited manpower as a limiting factor. A possible solution to this, besides outright recruitment, is collaboration with other licensed entities, he said.

At its IPO prospectus launch last month, Chew also said the company was expecting better revenue recognition from the margin financing component of its stockbroking business post-listing. The optimism was driven by confidence in its margin financing business, which enjoyed a compounded annual growth rate of 36% from FY2019 to FY2022.

Margin financing, which loosely means borrowing money from a brokerage company and using that money to buy stocks, is a credit facility given to individuals, public listed companies and corporations to finance the purchase of shares listed on Bursa Malaysia Securities Bhd.

En route to the ACE Market of Bursa Malaysia, Mercury Securities' IPO exercise entails a public issue of 157.1 million new shares and an offer for sale of 71.51 million existing shares, at an offer price of 25 sen per share. It aims to raise RM39.27 million from the IPO.

Of the proceeds, RM26.86 million will be used to develop Mercury Securities’ margin financing facility services, RM2.88 million to enhance its digitalisation programme and marketing activities for its stockbroking business and operations and RM4.63 million for working capital. The balance will be used to cover estimated listing expenses.

Upon its listing, Mercury Securities will have a market capitalisation of RM223.25 million — based on the issue price of 25 sen per share and its enlarged issued share capital of 893 million shares.