Why 2017 COULD BE A BLOCK­BUSTER YEAR

Sin­ga­pore’s IPOS for the first half of this year raised US$329M, and an­a­lysts ex­pect the vol­ume of IPO funds raised by the end of 2017 to sur­pass 2016 lev­els. Find out more about the nine IPO deals closed so far this year.

Singapore Business Review - - CONTENTS -

Sin­ga­pore’s sta­tus as one of the pow­er­house fi­nan­cial and busi­ness hubs in Asia Pa­cific is help­ing the coun­try’s IPO and eq­ui­ties in­dus­tries close out the year in record fashion de­spite a com­par­a­tively lag­gard first half. In­dus­try ex­perts and ob­servers share their in­sights and anal­y­sis on what tran­spired in Sin­ga­pore’s IPO and eq­ui­ties in­dus­tries in the first half of 2017, what can be ex­pected in the rest of the year, as well as the kinds of chal­lenges and op­por­tu­ni­ties for the two sec­tors along the way. Sin­ga­pore, South­east Asia’s rich­est coun­try in terms of per capita in­come, re­mains one of Asia Pa­cific’s big­gest and most vi­brant economies and mar­kets for IPOS and eq­ui­ties. With the coun­try’s long-stand­ing strong eco­nomic fun­da­men­tals and fi­nan­cial poli­cies, ex­perts re­main bullish that Sin­ga­pore will con­tinue its strong start in the first half of 2017 for IPOS and eq­ui­ties.

Sin­ga­pore’s IPOS for the first half of this year raised $450m (US$329M), ac­cord­ing to the lat­est data and fig­ures from PWC Sin­ga­pore. The vol­ume of IPO funds raised by the end of 2017 is also pro­jected to sur­pass 2016 lev­els with a num­ber of IPO deals ex­pected to be closed in the com­ing months (be­fore the end of the cal­en­dar year).

There were nine IPO deals — for both do­mes­tic and over­seas stock mar­kets — closed in the first half of this year, in­clud­ing one busi­ness trust trans­ac­tion. If in­clud­ing one reg­is­tra­tion and three lodge­ments made in the first six months of 2017, IPO fund-rais­ing is ex­pected to hit $3.03b dur­ing the pe­riod, ac­cord­ing to data from Deloitte. This is the high­est fig­ure since 2013 for Sin­ga­pore IPOS.

“We are see­ing a great start to the IPO ac­tiv­ity this year,” said Dr Ernest Kan, deputy manag­ing part­ner (mar­kets) for Deloitte Sin­ga­pore. “If we take into con­sid­er­a­tion the one reg­is­tra­tion and three lodge­ments as of 30 June, we are see­ing un­prece­dented level of funds raised since 2013. This per­for­mance re­in­forces pos­i­tive in­vestor sen­ti­ments for Sin­ga­pore’s eq­uity mar­ket.”

Sin­ga­pore’s IPOS for the first half of this year raised $450m (US$329M), ac­cord­ing to the lat­est data and fig­ures from PWC Sin­ga­pore.

Ma­jor deals

The nine IPOS in the first six months of 2017 have a to­tal ap­prox­i­mate cap­i­tal­i­sa­tion of $2.14b, ac­cord­ing to data from Deloitte. Eight com­pany IPOS raised $310m with $1.7b mar­ket cap­i­tal­i­sa­tion, whilst the one Busi­ness Trust trans­ac­tion on the SGX main­board raised $154m in pro­ceeds and $440m in mar­ket cap­i­tal­i­sa­tion. In com­par­i­son, de­spite 2016 hav­ing only seven IPOS in its first half, in terms of over­all value, the first six months of last year had a big­ger mar­ket cap­i­tal­i­sa­tion of $2.24b.

“Asian IPOS in­clud­ing Sin­ga­pore have done well so far and are ex­pected to out­per­form 2016,” said Khong Choun

Mun, chief ex­ec­u­tive of­fi­cer of RHT Cap­i­tal. “The strong mo­men­tum achieved in the first half of 2017 is ex­pected to con­tinue for the rest of 2017.”

Some of the ma­jor deals in the Sin­ga­pore IPO and eq­ui­ties mar­ket are clas­si­fied as a Catal­ist list­ing, a

spon­sor-su­per­vised list­ing plat­form for fast grow­ing lo­cal and in­ter­na­tional com­pa­nies ini­ti­ated by SGX. Of the nine IPOS, seven were Catal­ist list­ings which raised $125m funds with US$804M in mar­ket cap­i­tal­i­sa­tion, com­pared to the five reg­is­tered last year with $55m funds raised and $250m in mar­ket cap­i­tal­i­sa­tion.

For the two main SGX Main­board list­ings, the largest IPO was Hr­net­group Limited with the high­est funds raised at $174m and mar­ket cap­i­tal­i­sa­tion of $867m, fol­lowed by Dasin Re­tail Trust which raised $154m with a mar­ket cap­i­tal­i­sa­tion of $440m. Fi­bre net­work owner Netlink NBN Trust an­nounced its ini­tial public of­fer­ing (IPO) price at $0.81 per unit. The of­fer­ing price val­ues the mar­ket cap­i­tal­i­sa­tion of the trust at about $3b. The $2.3b IPO is also the big­gest in Sin­ga­pore since 2011 when Hutchi­son Port Hold­ings Trust raised $7.6b, and the sec­ond largest IPO in Asia this year af­ter the list­ing of Net­mar­ble Games Corp in South Korea.

The Netlink Trust deal will “change the dis­course/ sen­ti­ment on Sin­ga­pore IPOS for 2017,” ac­cord­ing to

Ro­maine Jack­son, head of South­east Asia at Dealogic, with the trans­ac­tion be­ing the “sixth largest flota­tion in Sin­ga­pore his­tory and the largest since IHH Health­care Bhd’s US$2B list­ing in July 2012. If the deal goes well, it will pos­i­tively im­pact in­vestor sen­ti­ment.”

This sen­ti­ment is echoed by Tham Tuck Seng, cap­i­tal mar­kets leader at PWC Sin­ga­pore. He says that although Sin­ga­pore’s first half of 2017 IPO vol­ume lagged be­hind 2016 fig­ures of the same pe­riod in terms of fund raised, he ex­pects the full year 2017 vol­ume to sur­pass that of

2016 with the list­ing of Netlink Trust lead­ing the way.” In terms of sec­tors, SGX’S tra­di­tional strengths in Real Es­tate In­dus­trial Trusts (REITS) and busi­ness trusts, also com­prised a sig­nif­i­cant por­tion of the coun­try’s IPO pro­ceeds for the first half of 2017 at 33%, af­ter pro­fes­sional ser­vices at 41%.

Sin­ga­pore in­te­gral to Asia Pa­cific drive

Asia Pa­cific, with its size and the stel­lar eco­nomic growth of its coun­tries over the past few years, re­mains the big­gest and most sig­nif­i­cant re­gion in terms of growth and devel­op­ment in the IPO and eq­ui­ties mar­kets in the first half of 2017. With the re­gion head­lin­ing the strong­est first half rally in nearly a decade, the global IPO mar­ket saw pro­ceeds reach US$83.4B — a 90% rise from the same pe­riod last year — with the num­ber of deals also ris­ing sig­nif­i­cantly by 70% to 772 reg­is­tered IPOS com­pared to the first half of 2016, ac­cord­ing to data by Ernst & Young.

Of this record fig­ure, the Asia Pa­cific re­gion ac­counted for 61% or 468 IPO deals and 44% or US$37B of all pro­ceeds of the global IPO mar­ket — this is the high­est first half of ac­tiv­ity for the re­gion since 2002. This is a re­mark­able devel­op­ment de­spite the con­tin­u­ous un­cer­tainty. “Asia Pa­cific’s po­si­tion as the lead­ing cen­ter of IPO ac­tiv­ity is un­likely to be chal­lenged through the re­main­der of 2017 with Greater China lead­ing the way,” said Max Loh, EY’S ASEAN and Sin­ga­pore manag­ing part­ner, adding that the re­gion’s sus­tained growth and devel­op­ment mo­men­tum un­der­pinned by stable fun­da­men­tals have con­tin­u­ously painted a pos­i­tive eco­nomic and fi­nan­cial out­look over the years.

He added that across ASEAN, in­vestor con­fi­dence is strength­en­ing due to the growth of the global and South­east Asian economies. “The Sin­ga­pore Ex­change (SGX) is likely to lead the IPO pipeline for South­east Asia in the sec­ond half of 2017, be­ing well-po­si­tioned as a plat­form for growth, along­side In­done­sia, Thai­land, and the Philip­pines.”

Chal­lenges, op­por­tu­ni­ties

How­ever, it’s not al­ways rain­bows and but­ter­flies for the Sin­ga­pore IPO and eq­ui­ties land­scapes, at least, for this year as some chal­lenges in the hori­zon are loom­ing. Jack­son de­scribes that there is some sort of drought in IPOS in Sin­ga­pore given the “lack of liq­uid­ity in the mar­ket out­side of REIT is­suances” which drives in­vestor sen­ti­ments to be “ul­tra-con­ser­va­tive when com­pared to Hong Kong.”

“Deal flow is down year on year, with no jumbo deals (more than US$1B) so far this year. This will change with Netlink’s IPO (largest deal in 5 years). List­ing rules may be de­ter­ring for­eign list­ing in Sin­ga­pore. There are also con­cerns that Sin­ga­pore is los­ing its ap­peal as a re­gional fundrais­ing hub,” the Dealogic of­fi­cial added.

Another challenge that the Sin­ga­pore IPO and eq­ui­ties land­scape is fac­ing is the in­creas­ing global com­pe­ti­tion for po­ten­tial list­ings. Dr Kan shares that some com­pa­nies are look­ing at other bourse op­er­a­tors or are be­ing in­vited by them. “Other bourse op­er­a­tors are ac­tively invit­ing po­ten­tial list­ing can­di­dates to list on their stock ex­change,” he shared. Some ex­am­ples in­clude the Lon­don-based NEX Ex­change be­ing in Sin­ga­pore for the “NEX Ex­change Asia Road­show 2017” in Fe­bru­ary of this year, and the Tokyo Stock Ex­change host­ing an IPO sem­i­nar tar­get­ing “high-qual­ity tech com­pa­nies” in June. As part of the Australian Stock Ex­change (ASX) Spot­light Se­ries in 2014, the ASX has also held ASX Spot­light In­vestor Con­fer­ences in a few coun­tries, in­clud­ing Sin­ga­pore twice each year.

Dr Kan also shares some lo­cal com­pa­nies who are head­ing (or are con­sid­er­ing) to over­seas ex­changes.

This in­cludes Sin­ga­pore based tech startup Sea

(for­merly Garena) in the busi­ness of on­line gam­ing and e-com­merce mo­bile shop­ping and pay­ment ser­vices which is plan­ning an IPO in New York to raise around $1b Osim In­ter­na­tional, which op­er­ates 172 stores

in main­land China, 35 in Hong Kong, and 26 stores in Sin­ga­pore, of­fi­cially delisted from SGX in April and is pre­par­ing an IPO in Hong Kong as V3 Group, de­scribed as an Asian lux­ury group in the life­style and well­ness mar­kets.

But ex­perts re­main firm about Sin­ga­pore IPO and eq­ui­ties in­dus­tries to bounce back and re­tain its ap­peal as fron­trun­ner in both sec­tors, with the SGX and the gov­ern­ment con­tin­u­ing to de­sign and im­ple­ment poli­cies to keep up with the times and trend — par­tic­u­larly in terms of tech­nol­ogy. “There should be greater in­vest­ment liq­uid­ity in the sec­ond half of 2017, which will be good news for com­pa­nies that are plan­ning to go public,” Loh says. “The SGX is mak­ing ef­forts to help lo­cal tech­nol­ogy com­pa­nies ac­cess the cap­i­tal mar­ket, and this should drive IPO trans­ac­tions in the near fu­ture.”

This is echoed by Dr Kan, say­ing that SGX’S ac­tive en­gage­ment with tech­nol­ogy star­tups and small and medium-sized en­ter­prises in terms of at­tract­ing in­vest­ment from pri­vate and public cap­i­tal mar­kets to sup­port their ex­pan­sion will make for a good fu­ture for Sin­ga­pore IPOS and eq­ui­ties. Pwc’s Seng added that “SGX con­tin­ues to be the pre­ferred des­ti­na­tion for rais­ing debts given its less com­pli­cated com­pli­ance struc­ture for debt list­ing and fast ap­proval.” But as mar­kets in the re­gion be­come more so­phis­ti­cated, com­pe­ti­tion will get more in­tense.

Out­look

“Sin­ga­pore has seen a flurry of eq­uity mar­kets ac­tiv­i­ties with sev­eral Sin­ga­pore re­lated com­pa­nies list­ing on the SGX and the Hong Kong Stock Ex­change,” said Mar­cus

Chow, cor­po­rate part­ner at Bird & Bird TMD. “The next 12 months look san­guine and we are op­ti­mistic that con­di­tions for book build­ing will hold.”

Pwc’s anal­y­sis sug­gests that ris­ing sec­tors such as con­sumer and pro­fes­sional ser­vices will con­tinue the up­trend with Sin­ga­pore’s po­si­tion as one of the main busi­ness and fi­nan­cial ser­vices cen­tres in the re­gion. Health­care is also ex­pected to main­tain its po­si­tion as a strong con­trib­u­tor to Sin­ga­pore IPO and eq­ui­ties in­dus­tries, while the is­land state is also ex­pected to re­main the choice list­ing des­ti­na­tion for REITS and busi­ness trusts with notable in­ter­est from Chi­nese-based real es­tate play­ers. “We are ex­pect­ing a strong pipeline of block­buster list­ings in the sec­ond half of 2017, and cou­pled with the strong post-ipo per­for­mance of the com­pa­nies listed in the first half of 2017, Sin­ga­pore’s mar­ket is buzzing with ex­cite­ment,” says Dr Kan.

Apart from the coun­try’s tra­di­tion­ally strong fun­da­men­tals and stable eco­nomic poli­cies help­ing out­look to re­main up­beat, ex­perts are shar­ing tips on how the Sin­ga­pore IPO and eq­ui­ties mar­ket can stay ahead of the com­pe­ti­tion and con­tinue its growth mo­men­tum.

“With Sin­ga­pore’s pro-busi­ness en­vi­ron­ment and strong fun­da­men­tals — such as trans­par­ent reg­u­la­tory regime, in­ter­na­tional ex­change, and rel­a­tively quick time to mar­ket — Sin­ga­pore re­mains a pre­mier lo­ca­tion for cap­i­tal fundrais­ing,” says PWC Sin­ga­pore’s Seng. “For Sin­ga­pore to re­main ahead of the curve, we must con­tinue to main­tain our ex­ist­ing strengths (e.g. REITS and busi­ness trusts) and cap­i­talise on new op­por­tu­ni­ties.”

We are ex­pect­ing a strong pipeline of block­buster list­ings in the sec­ond half of 2017, and cou­pled with the strong post-ipo per­for­mance of the com­pa­nies listed in [first half of 2017], Sin­ga­pore’s mar­ket is buzzing with ex­cite­ment.

Mo­hamed Nasser Is­mail

Ernest Kan

Khong Choun Mun

Ro­maine Jack­son

Tham Tuck Seng

Max Loh

Mar­cus Chow

Deal #1:hr­net­group Limited had the largest IPO with the high­est funds raised at $174m.

Deal #2: The Netlink Trust deal is largest since Ihh health­care Bhd’s US$2B list­ing in 2012.

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