Two bumper deals stir up IPO scene

Frasers Logistics and Industrial Trust raised around $903 million in its public listing last month - the largest IPO deal here since 2013. At its last close, Frasers had risen 7.87 per cent from its listing price to 96 cents.
Frasers Logistics and Industrial Trust raised around $903 million in its public listing last month - the largest IPO deal here since 2013. At its last close, Frasers had risen 7.87 per cent from its listing price to 96 cents.PHOTO: FRASERS LOGISTICS

Singapore's stock market has welcomed a string of new listings this year after a very sluggish 2015, thanks partly to two bumper deals in the trust segment that market watchers said have encouraged other issuers to follow through.

The healthy first half may in turn lead to a sustained pipeline for the coming months, but uncertainty looms due to geopolitical events ahead.

HALF-YEAR REVIEW

Eight initial public offerings (IPOs) have been staged this year, with two listings on the mainboard and six on the Catalist, including United Global, which starts trading tomorrow.

A ninth IPO, by Advancer Global, will close today and trading will commence next Monday. Meanwhile, Top Glove was launched for its secondary listing here on June 28.

In all, these deals will have raised about $1.62 billion, almost 29 times more than the $56 million raised in the first half of 2015.

The larger volume was driven mainly by two big deals. In May, Manulife US Real Estate Investment Trust made a splash with its US$519 million (S$702 million) IPO, while Frasers Logistics and Industrial Trust raised around $903 million in its offer last month - the largest deal here since 2013.

As a result, Singapore stood out as one of the top-performing IPO markets in the Asia-Pacific, which saw total deals drop 37 per cent year on year to 229 in the first six months, while the amount raised fell 65 per cent to US$17 billion, Ernst & Young reported this week.

TOP PERFORMERS

Manulife US Reit rose 3.61 per cent from its IPO price to 86 US cents at its last close, while Frasers Logistics and Industrial Trust added 7.87 per cent to 96 cents.

"For listings of their sizes, I think they have performed well given the volatility in the market. But this should not be surprising as investors are still hungry for yield in this low-interest-rate environment," KGI Fraser Securities trading strategist Nicholas Teo said.

Meanwhile, the top gainer among this year's new listings has been Acromec, which manufactures controlled environment facilities such as clean rooms and laboratories. Since its IPO, it has added 225 per cent to 71.5 cents.

RHB head of research Ong Kian Lin said: "Acromec is basically a healthcare story, which is attractive to investors now as people expect the Government's push to grow the biomedical industries here to be a strong catalyst for companies like Acromec."

But there were also laggards. Gold mining firm Anchor Resources has shed 52 per cent to 12 cents since its IPO, while clean-air solutions provider Eindec has slipped 50.95 per cent to 10.3 cents.

SECOND HALF

The IPO pipeline in the coming months will likely remain just as healthy, said Mr Ernest Kan, Deloitte South-east Asia's leader for offering services.

The momentum shown by Manulife US Reit and Frasers Logistics and Industrial Trust "sets a good stage for IPO aspirants and investors, which we hope will encourage and whet their appetite for new share-offering activities", he noted, adding that historically IPOs are more active in the second half.

Already more Reits are lined up to go public here. EC World Reit, with a portfolio of Chinese logistics and port assets, said last week that it plans to raise $637.6 million through a mainboard listing. A hotel Reit by Chinese developer Greenland Group and Amare Investment Management is also round the corner.

"The appetite for yield stocks is set to continue against a low-rate, slow-growth global backdrop. Defensive names with sustainable distributions are likely to be received well by both institutional and retail investors," said Mr Vijay Vaidyanathan, Morgan Stanley's global capital markets head for South-east Asia.

Other new listing plans that have made news included UnUsUal, a subsidiary of film company mm2, and a spin-off IPO for Q&M Dental's Chinese businesses.

Mr Teo said: "At any time there's always a large pipeline of issuers waiting to go in - it's just a matter of timing. I think a previously pent-up issuance demand will lead to strong volume in the second half as issuers bring their time schedule forward after the encouraging signs in the first half." He added: "But ultimately we can't know for sure. In the next 12 to 15 months, the market will brace itself for geopolitical events including elections in the US and Germany.

"The uncertainty could lead to an IPO rush to avoid the impact, or it could simply scare issuers into delaying their plans again."

A version of this article appeared in the print edition of The Straits Times on July 07, 2016, with the headline 'Two bumper deals stir up IPO scene'. Print Edition | Subscribe