Business trusts, Reits 'set to top' IPO scene

Listings of real estate investment trusts (Reits) and business trusts (BTs) will continue to dominate initial public offerings (IPO) on the Singapore Exchange (SGX), according to a PwC report titled Equity Capital Markets Watch - Singapore: 2017 Year In Review.

"The year 2017 was a brilliant one for IPOs in Singapore. With the market upturn, we see that Reits and business trusts continue to dominate the market, making up 88 per cent of total funds raised," said Mr Tham Tuck Seng, PwC Singapore's capital markets leader.

Since 2015, the SGX has seen eight listings of Reits and BTs, raising a combined $6.6 billion in gross proceeds and accounting for 85 per cent of the total IPO funds raised over the past three years.

"Notably, all property trusts listed in the past three years have 100 per cent of their investments outside of Singapore. This is an encouraging sign as Singapore continues to remain as a listing destination of choice for overseas real estate players," said the report.

The attractive dividend yields offered by these property trusts are their key appeal. For the first nine months of 2017, the average yield of these trusts was 6.4 per cent, outperforming the MSCI Asia-Pacific Reit index which had an average dividend yield of 4.28 per cent.

The SGX may also see more listings of food and beverage (F&B) companies this year, given "the impressive performance of F&B counters in 2017, coupled with the cash business and nature of these companies".

Last year, three F&B companies were listed. Newly listed Kimly, RE&S Holdings and No Signboard Holdings raised some $90.3 million in total gross proceeds.

However, the SGX could face challenges in attracting technology companies to list here, given that rivals, including Nasdaq and the New York Stock Exchange, offer attractive valuations.

"In addition, SGX is also up against competition from private equity firms and individual investors that offer alternative funding opportunities," the report said.

The SGX is also expected to face more intense competition from the Hong Kong Stock Exchange (HKEX), which is seen to offer higher valuations and liquidity.

The number of Singapore-based companies listed on the HKEX has more than doubled in the past year to 13 in 2017 from six in 2016. PwC foresees that local companies will continue listing on the HKEX.

A version of this article appeared in the print edition of The Straits Times on January 04, 2018, with the headline 'Business trusts, Reits 'set to top' IPO scene'. Print Edition | Subscribe