Fi­nan­cial in­sight

Sin­ga­porean firms who opted to list abroad bal­looned 300% in vol­ume com­pared to do­mes­tic flota­tions.

Singapore Business Review - - CONTENTS -

Sin­ga­pore ipos lag asian peers as home­grown firms rush to list abroad

When Sin­ga­porean gam­ing com­pany Razer chose to list in Hong Kong last year, it did not only send a clear game-over sign to the lo­cal bourse. It started the spate of cross-bor­der list­ings from other home­grown firms, and the bourse took all the blows.

Over­all IPOS by Sin­ga­pore is­suers bal­looned 78%

YOY to raise US$459M in the first half of 2018 al­though this rep­re­sents weaker ac­tiv­ity com­pared to their Asian coun­ter­parts. The 12 list­ings in Sin­ga­pore, which in­di­cates a 20% YOY in­crease, also rep­re­sents a grad­ual de­cline in num­ber of list­ings in the last ten years, ac­cord­ing to law firm Baker Mcken­zie.

“SGX’S do­mes­tic IPO ac­tiv­ity and per­for­mance re­mains stable and strong,” said Tay Hwee Ling, Global IFRS and Of­fer­ing Ser­vices Leader for Deloitte South­east Asia and Sin­ga­pore.

How­ever, with a grow­ing num­ber of Sin­ga­pore com­pa­nies choos­ing to list abroad, the num­ber of cross­bor­der list­ings bal­looned 300% in terms of vol­ume and 166% in terms of value com­pared to the 64% in­crease in do­mes­tic cap­i­tal rais­ing. The lion city is also los­ing out on prof­itable tech com­pa­nies as gam­ing tech­nol­ogy com­pany Razer chose to list in Hong Kong last year. Less than eight months af­ter delist­ing from SGX, OSIM In­ter­na­tional relisted as V3 Group in the Asian fi­nan­cial hub. As a re­sult, Sin­ga­pore has been steadily rolling out pro­grammes to boost the com­pet­i­tive­ness of the lo­cal bourse and lure tech com­pa­nies to list.

The Hong Kong GEM has emerged as the top des­ti­na­tion for lo­cal com­pa­nies seek­ing out­side list­ings af­ter ac­count­ing for two-thirds of to­tal num­ber of is­sues from Sin­ga­pore with mar­ket ex­perts at­tribut­ing the close prox­im­ity of Hong Kong to China’s mas­sive mar­ket and ef­fec­tively di­min­ish­ing Sin­ga­pore’s at­trac­tive­ness.

Over­all IPOS by Sin­ga­pore is­suers bal­looned 78% yoy to raise US$459M in the first half of 2018 al­though this rep­re­sents weaker ac­tiv­ity com­pared to their Asian coun­ter­parts.

Notable deals in 2018

In­cluded in the top do­mes­tic IPOS by Sin­ga­porean is­suers in the first half of 2018, mean­while, are Sasseur REIT’S $300.68m in pro­ceeds, through Real Es­tate In­vest­ment Trusts (REIT), and the $41.82m in pro­ceeds from SLB Devel­op­ment Limited in the real es­tate sec­tor; the $14.93m in pro­ceeds from LY Cor­po­ra­tion Limited in the con­sumer prod­ucts and ser­vices sec­tor; and the $8.22m in pro­ceeds from Asian Health­care Spe­cial­ist in the health­care sec­tor. All of the men­tioned do­mes­tic IPOS were listed on the Sin­ga­pore Ex­change (in­clud­ing Catal­ist).

An­thony Ang, chief ex­ec­u­tive of­fi­cer of Sasseur REIT man­ager com­mented, “Given that the port­fo­lio of Sasseur com­prises of as­sets based in China, a list­ing in Hong Kong

or the Main­land of China would have been a more di­rect op­tion for Sasseur. How­ever, a list­ing in Sin­ga­pore was sought as the pre­ferred op­tion as the Spon­sor be­lieves in the im­por­tance of list­ing the REIT on a stock ex­change that at­tracts qual­ity in­vestors and one with higher liq­uid­ity in the REIT and Busi­ness Trust (BT) space.”

“In ad­di­tion, Sin­ga­pore has a more ro­bust and ma­ture REIT mar­ket com­pared to Hong Kong, with over 40

REITS and BTS listed on SGX in­clud­ing many with as­sets in China,” Ang added. “The Spon­sor is of the view that in­vestors in SGX listed coun­ters are more fa­mil­iar with the REIT and BT prod­uct, has a global per­spec­tive, and are there­fore more ap­pre­cia­tive of what the REIT can of­fer. This would help to sup­port de­mand and bol­ster the liq­uid­ity of the REIT’S units.”

Mean­while, some of the top cross-bor­der IPOS by Sin­ga­porean is­suers in the first half of 2018, ac­cord­ing to data from Baker Mcken­zie, in­clude the $22.42m in pro­ceeds by HPC Hold­ings Limited and the $14.01m in pro­ceeds from Hke Hold­ings Limited for the in­dus­trial sec­tor; the $20.45m in pro­ceeds from ZACD Group Limited for the real es­tate sec­tor; the $8.95m in pro­ceeds from ISP Global Limited in the telecom­mu­ni­ca­tions in­dus­try; and the $8.32m from IAG Hold­ings Limited in the ma­te­ri­als sec­tor. All of the men­tioned cross-bor­der IPOS by Sin­ga­porean is­suers were listed in Hong Kong (HKEX and HK GEM).

A global dilemma

This rel­a­tively mild per­for­mance from Sin­ga­pore’s lo­cal bourse in the first half of 2018, how­ever, is not an iso­lated case, ac­cord­ing to in­dus­try ex­perts and ob­servers. Deloitte’s Ling noted that other ma­jor bourses around the Asia and Pa­cific re­gion are rel­a­tively see­ing a sim­i­lar mod­er­at­ing trend over the first half year of 2018.

“Look­ing at the key ex­changes in the re­gion, there have been a year-on-year de­crease in the first half of 2018,” she ex­plained, cit­ing for ex­am­ple the Shang­hai Stock Ex­change’s ex­pe­ri­ence in the first 6 months of 2018, which saw 37 IPOS listed, rais­ing around RMB64.8B. This is a

70% de­cline in vol­ume from the 120 IPOS in the first half of 2017, which raised RMB76.7B, due to a fall in list­ing ap­provals.

“The Stock Ex­change of Hong Kong saw a 8.6% fall in funds raised, de­spite see­ing a 44.1% in­crease in the num­ber of IPOS from 68 to 98,” Ling elab­o­rated.

Adrian Koh, EY As­sur­ance Growth Mar­kets Leader, ex­plained that the con­tin­ued global un­cer­tain­ties have ham­pered ac­tiv­i­ties de­spite South­east Asia re­gion’s dy­namic growth tra­jec­tory.

“IPO ac­tiv­ity in Sin­ga­pore, like other parts of the re­gion—in­done­sia, Malaysia, the Philip­pines, and Thai­land—with the ex­cep­tion of REITS, have pre­dom­i­nantly been smaller cap list­ings for the first half of 2018,” he men­tioned.

“This is a trend we ex­pect to con­tinue into the sec­ond half of 2018 as geopo­lit­i­cal un­cer­tainty, trade ten­sions, and macroe­co­nomic con­di­tions con­tinue to mute IPO ac­tiv­ity.”

SGX’S move

Given the highly com­pet­i­tive land­scape of IPO ac­tiv­i­ties in the Asia-pa­cific—with bourses vy­ing against each other for the lion’s share of cross-bor­der list­ings— in­dus­try ex­perts and ob­servers are in agree­ment that Sin­ga­pore’s eq­uity mar­ket will need to up its game in or­der to stay com­pet­i­tive and at­trac­tive. Some ef­forts are al­ready be­ing rolled out to boost the com­pet­i­tive­ness and at­trac­tive­ness of Sin­ga­pore’s eq­uity mar­kets over the last two years, par­tic­u­larly tar­get­ing tech­nol­ogy com­pa­nies to list in the city state’s bourse.

For in­stance, SGX part­nered with In­fo­comm Me­dia Devel­op­ment Au­thor­ity in 2017 to make IPO launches eas­ier for high-tech star­tups. The part­ner­ship would al­low the bourse oper­a­tor to or­gan­ise fi­nan­cial sup­port for Imda-ac­cred­ited com­pa­nies in their IPO jour­ney. SGX also signed an agree­ment with Nas­daq in 2017 to en­able com­pa­nies to list on both venues and pro­mote each other’s mar­ket—help­ing Asian com­pa­nies to first list in Sin­ga­pore as a spring­board and then ease smoothly to Nas­daq as they ex­pand their global footholds, ac­cord­ing to anal­y­sis by Baker Mcken­zie.

An­other ef­fort is the de­ci­sion of SGX to team up with the Tel Aviv Stock Ex­change in May 2018 to get tech­nol­ogy and health­care com­pa­nies to list on both ex­changes by as­sist­ing dur­ing the pre-list­ing stage, fa­cil­i­tat­ing the list­ing process, and pro­vid­ing is­suers with post-list­ing sup­port.

Stay­ing com­pet­i­tive

Ling is firm that de­spite the chal­lenges plagu­ing the lo­cal eq­uity mar­ket in terms of stay­ing com­pet­i­tive and at­trac­tive for cross-bor­der list­ings in the Asia-pa­cific, the city-state’s lo­cal bourse will re­main a hot item es­pe­cially for tech­nol­ogy firms aim­ing to tap into Sin­ga­pore’s wide in­vestor pool. For in­stance, in the last five years, there were 45 Sin­ga­pore com­pa­nies and 40 for­eign com­pa­nies that listed on the SGX alone.

“The SGX con­tin­ues to be an at­trac­tive list­ing des­ti­na­tion of choice for both Sin­ga­pore com­pa­nies and for­eign com­pa­nies,” she ex­plained. “With the in­tro­duc­tion of dual-class shares struc­tures, SGX is now in a po­si­tion to sup­port high-growth com­pa­nies and at­tract block­buster list­ings from around the world, whilst broad­en­ing in­vest­ment op­tions for in­vestors and adding to the vi­brancy of Sin­ga­pore’s cap­i­tal mar­ket.”

Growth driv­ers

De­spite per­sis­tent un­cer­tain­ties plagu­ing the global econ­omy with the spec­tre of a trade war damp­en­ing growth prospects, in­dus­try ex­perts and ob­servers re­main op­ti­mistic re­gard­ing Sin­ga­pore’s eq­ui­ties mar­ket and IPO ac­tiv­i­ties. Deloitte, for in­stance, men­tioned that the citys­tate’s lo­cal bourse will be driven mainly by the real es­tate and health­care sec­tors, if pre­vi­ous per­for­mances are to be used as ba­sis.

In a sep­a­rate re­port, Ling noted a bullish trend seen in the health­care in­dus­try with health­care IPOS show­ing a grow­ing price earn­ings ra­tio on list­ing over the last five years. “At Deloitte, we con­tinue to see a healthy pipe­line of do­mes­tic and cross-bor­der IPOS,” she noted. “We are cau­tiously op­ti­mistic that there will be more list­ings in the sec­ond half of 2018.”


Re­gion­ally, EY data showed that list­ing ac­tiv­ity in Asi­a­pa­cific is ex­pected to re­main ro­bust in the sec­ond half of 2018 de­spite a slight drop in IPO ac­tiv­ity in the first six months of the year. Ringo Choi, EY Asia-pa­cific IPO Leader, high­lighted Asia-pa­cific’s’ strong macroe­co­nomic fun­da­men­tals and in­vestor ap­petite as an ef­fec­tive coun­ter­bal­ance to the oth­er­wise volatile per­for­mance of IPO ac­tiv­ity across the re­gion. Af­ter all, Asia-pa­cific still ac­counted for a 46% share of global share sales and 31% of global IPO pro­ceeds in the first half of 2018 on the back of block­buster list­ings in Viet­nam and Ja­pan, with tech and fi­nan­cial firms tak­ing the lead.

“Fol­low­ing the gen­eral de­clines in IPO per­for­mance in the first six months of 2018, largely re­sult­ing from re­cent in­ter­est rate in­creases as well as global po­lit­i­cal and eco­nomic un­cer­tain­ties, we ex­pect to see a re­bound in the deal size of the IPOS in the sec­ond half of the year as a num­ber of mega IPOS be­gin to hit the mar­ket,” he said.

In terms of the out­look of global IPO ac­tiv­ity, which will in­evitably have an im­pact in the re­gion’s (and Sin­ga­pore’s) eq­uity mar­ket per­for­mance, EY’S Stein­bach reck­oned a more ac­com­mo­dat­ing global eco­nomic en­vi­ron­ment for the rest of 2018. “The good news is that eco­nomic con­di­tions con­tinue to be en­cour­ag­ing, eq­uity val­u­a­tions are high in many parts of the world, and in­ter­est rates re­main low,” he ex­plained. “As a re­sult, we ex­pect a resur­gence in IPO ac­tiv­ity dur­ing the sec­ond half of 2018.”

we ex­pect to see a re­bound in the deal size of the IPOS in the sec­ond half of the year as a num­ber of mega IPOS be­gin to hit the mar­ket.

Deal #1: in­cluded in the top Do­mes­tic ipos is sasseur Reit’s $300.68m fund


An­thony Ang

Tay Hwee Ling

Adrian Koh

Ringo Choi

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