Singapore yearns for Mainboard IPOs amid shifting funding landscape
Singapore’s IPO performance improved significantly in 2019 in terms of the total funds raised. A total amount of $3.1 billion was raised during the year, which was more than fourfold the $730 million raised in 2018. However, other statistics are painting a worrying picture, which may suggest that Singapore’s attractiveness as a listing destination is staying muted.
Last year, the total number of IPOs fell to 11 from 15 the year before. Of the 11 IPOs, seven are listings on the Catalist board of the Singapore Exchange (SGX), raising a total of just $59 million. This compares to 12 and 13 Catalist listings in 2018 and 2017, respectively, with total IPO amounts raised of $174 million and $273 million.
On the Mainboard, there were no listings in 2019 except for real estate investment trusts (REITs) and one business trust. This compares to two and three non-REIT and non-trust Mainboard listings in 2018 and 2017, respectively, which raised $134 million and $298 million.
The only saving grace was the continued strength of the real estate sector as an IPO pipeline. In 2019, the listings of three REITs and a trust on the Mainboard raised a total IPO amount of $3.05 billion. This was more than seven times the $422 million raised from one REIT listing in 2018, but 27% lower than the $4.17 billion raised from two REIT and two business trust listings in 2017.
Tay Hwee Ling, disruptive events assurance leader, Deloitte Southeast Asia and Singapore, says the attractiveness of SGX as a listing destination for REITs and business trusts can be attributed to several factors. From an issuer’s perspective, Singapore’s progressive regulatory framework provides confidence for issuers to list here, she adds. Moreover, the local efficient tax framework is attractive to foreign issuers and sponsors. There is also a critical mass of global institutional and high-net-worth investors here who are familiar and receptive to such an asset class, she says.
From a local investor’s point of view, Tay says yield stocks tend to be favoured over growth stocks. This is because they perceive the former to be “safer” investments, she explains. As such, there is no problem in garnering subscription demand during the IPO roadshow of REITs and trusts. “During certain months, you may see two roadshows running at the same time, [but] they are still able to get the books filled,” she said at a Nov 26 briefing.
PE and VC threat
So what could be ailing the local IPO pipeline? Tay says the fundraising landscape has changed in the last few years. The rise of private exchanges and the growth of private equity (PE) investors are providing more options for companies to raise funds. This may facilitate “faster” and “greater access” to funds at a lesser cost, she says. On top of that, companies have the option of pursuing an overseas listing, she adds.
According to Duff & Phelps, Singapore recorded 166 PE and venture capital (VC) deals worth an aggregate of US$6.51 billion in 2019. This is higher than the 154 PE and VC deals recorded in 2018, although slightly lower in total deal value compared with US$6.59 billion. In 2017, there were 125 PE and VC deals transacted worth US$22.79 billion. This was largely driven by the privatisation of Global Logistic Properties and the acquisition of Equis Energy, which accounted for more than 70% of the PE and VC deal value in Singapore.
Elsewhere in the region, Malaysia recorded 31 PE and VC deals totalling US$1.56 billion, while Indonesia registered 81 PE and VC deals worth US$1.38 billion during the year. On the whole, the three countries chalked up 278 PE and VC deals totalling US$9.45 billion.
According to Duff & Phelps, technology companies were the top contributors for PE and VC deals, accounting for over 40% of deal values, followed by healthcare and real estate companies. A prime example is ride-hailing company Grab Holdings, which has ventured into food delivery, financial payments and other areas. SoftBank
Group Corp invested US$1.46 billion in Grab last year, while US investment management company Invesco and Irish consumer credit reporting company Experian jointly invested US$300 million in Grab, it notes.
Other examples include investments in DUO Tower and DUO Galleria. Allianz Real Estate and property investment management company GAW Capital Advisors poured US$1.16 billion into DUO Tower and DUO Galleria, notes Duff & Phelps. Meanwhile, global investment company EQT Partners invested US$485 billion in Health Management International, which was delisted on Dec 20, 2019, it adds.
What does this mean for the local IPO pipeline ahead? Tay says there are still companies that are keen to list on SGX – both Mainboard and Catalist. Late last year, Thai Beverage was reportedly mulling over the listing of its brewery business on SGX – which is likely to be the biggest issue since Hutchison Port Holdings Trust raised US$5.4 billion back in 2011.
The Catalist board could also see more listings this year, following the lodgement of five preliminary offer documents on SGX late last year. The documents were lodged by water treatment company Memiontec Holdings, Indonesia-based coal trader Resources Global Development, healthcare company Singapore Women’s & Children’s Medical Group, taxi company Transcab Holdings and Russia-based agriculture company Don Agro International.
That aside, Tay says she expects more REITs and service-based companies to list this year. “But of course, these companies would be very sensitive in terms of the market pricing and valuation,” she says. “If you launch at the right timing … you will be able to fill up the book at proper valuations.” Tay adds that companies would also be more “discerning” in weighing the pros and cons of an IPO vis-à-vis private capital raising.
Mark Liew, CEO of sponsor firm PrimePartners Corporate Finance, says he expects more listings this year since there were not many last year. He says the PrimePartners’ IPO pipeline currently includes companies from the mining, agriculture (Don Agro), F&B, property development and fintech sectors. These companies are mostly based in Asean, but there are some from South Korea, Japan and even Russia, he says. “We expect 2020 to be a better year for listings,” he tells The Edge Singapore.
Liew adds that the Mainboard could also see listings of companies other than REITs and trusts this year. “From what I understand, there are more companies considering to list on the Mainboard,” he says. “SGX is trying to broaden the base.”
However, Yee Chia Hsing, head of Catalist at CIMB Bank, says he foresees a challenging IPO pipeline ahead. He points out that the market is volatile now, owing to a US strike that killed a top Iranian general early this year. “This is creating a lot of uncertainty,” he tells The Edge Singa
pore. Yee adds that his clients are also considering other fundraising options, such as iSTOX, which is a regulated platform that offers issuance, settlement, custody and secondary trading of digitised securities. iSTOX is open only to accredited and institutional investors.
Mixed performance
In the meantime, the performance of the newly listed companies in 2019 has been mixed. There is no clear trend among the outperforming and underperforming companies – whether by type of board listing, industry or country of operations.
The top-performing newly listed company