Fewer IPOs but higher proceeds for Singapore in 2019

Total proceeds rose fourfold to $3.13b from $730m in 2018.

Singapore was a small dot amidst a bleak global landscape for initial public offerings (IPO) in 2019, as total proceeds rose over fourfold to $3.13b from 2018’s $730m. The number of IPOs dipped to 11 from 15 in the previous year, according to PwC Singapore.

Four REITs continued to support the majority of IPO activity and contributed a whopping 98.1% ($3.07b) to the total proceeds raised during the year. To date, REITs have contributed 87% of total IPO funds raised over the past five years.

Three newly-listed REITs had portfolios comprising assets mainly located in the US: ARA US Hospitality Trust has 38 upscale hotels; Eagle Hospitality Trust has 18 hotels; and Prime US REIT focuses on office buildings in the country.

Majority of the new listings were winners in terms of performance. In terms of first-day closing performance, seven out of the 11 IPOs closed above IPO price whilst three went below, showing similar results to 2018. According to PwC, these companies have reported positive earnings results despite the macroeconomic challenges.

TrickeStar Limited topped the spot for both first-day closing performance with 35% gains. Although its headquarters is in Kuala Lumpur, the key focus markets are in the US and Canada. “The main driving force of the share price’s increase can be a result of individual management share purchase from the market,” said Tham Tuck Seng, capital markets leader at PwC Singapore.

Reclaims Global rebounded from worst performer with a 36% loss on day one trading to a positive of 8% gains YTD 2019 on the Catalist Board. “Its key market is public sector construction projects in Singapore, eyeing for the growth in major infrastructure demand locally. The company has posted improved results than prior periods, supporting its share to higher prices,” Tham said.

The bourse also had its fair share of losers. Alliance Healthcare Group Limited, with key business segments of providing healthcare solutions and General Practitioner clinics, saw
its shares fall as low as 33%. PwC cited a probe from the Ministry of Manpower in November on a locum doctor in one of its clinics, who had the clinic suspended from applying new work passes.

Another company, Eagle Hospitality Trust, had its stock hit by numerous factors, including a disclosure of properties sold to the sponsors ahead of the IPO. The SGX raised queries on the talks of extensive repairs needed for its floating hotel Queen Mary.

Delisting galore
Singapore continued to take a hit from delistings after 24 companies were removed from the bourse. M1 grabbed the headlines after major shareholders privatised the company in a need to raise its competitiveness in the market. A majority shareholder also acquired the remaining shares of corporate secretarial services firm Boardroom Limited in view of greater control and management flexibility after the delisting.

With majority shareholders taking the helm in 2019’s delistings, SGX has revamped its rules to strengthen minority shareholder protection. Under the new ruling, higher premiums will be required for companies looking for voluntary delisting as the exit offer requires the appointed independent financial advisor to opine if the offer is fair and reasonable. Companies are also required to receive 75% approval for shares held by independent shareholders. “With the new ruling in place, we may expect a decreasing trend of delisting in the future,” Tham commented.

Competition tightens
With a growing number of delistings, increasing Singapore’s competitiveness has become more urgent than ever as Hong Kong, Malaysia and Thailand are also making efforts to attract companies. The Stock Exchange of Hong Kong (HKEx) continues to attract companies with its perception on higher valuations and liquidity as compared to the SGX, with nine Singapore companies listing on the HKEx in 2019. However, of the nine Singapore companies, only two counters remained above IPO price.

The Thailand IPO market beat Singapore and dominated Southeast Asia with 27 listings, raising a total of approximately US$2.6b. The Stock Exchange of Thailand has also ramped up marketing efforts to attract regional companies to raise funds via listing of REITs, tapping into the gap in investment alternatives for Thai investors whilst the central bank interest rates remain low. “This may pose as a threat to SGX in attracting foreign REITs considering to list in the region,” Tham said.

Industry strengths
As Singapore gets surrounded by other competitive bourses, the SGX is still projected to dominate especially in the niche sectors of REITs and business trusts, as well as F&B and healthcare segments, in 2020. However, even these industries showed mixed results.

The number of healthcare listings fell from four companies in 2018 to just one firm in 2019, Alliance HealthCare Group. However, this sector will remain a key segment on the SGX as listed companies have seen an average of 47 times price-to-earning ratio.

Apart from healthcare, F&B also remains a key focus industry. For instance, strong branding and overseas expansion helped Jumbo Group see a 50% increase in share price and Koufu Group gain 22%. “As Singapore F&B brands establish their status overseas and with the growth of Singapore food quality’s reputation, we expect more F&B listings from 2020 and beyond,” Tham said.

However, F&B companies with mainly local presence, namely, RE&S Holdings, Kimly Limited and No Signboard, saw a decrease in share prices due to lower profits and increasing competition and costs.

The SGX has taken strides to maintain its competitiveness in the region through programmes, such as the SGX Fast Track programme which was launched to reward companies with good corporate governance with incentives in the form of prioritised clearance for selected corporate-action submissions. It also partnered with NASDAQ and Tel-Aviv Stock Exchange to raise opportunities for companies, particularly those in the technology and healthcare sectors to fund their growth in Asia and globally, allowing companies to a dual listing or a simultaneous IPO on both exchanges.