A slate of new SGX listings is poised to take place. But to sustain the momentum, issuers need to revive retail interest too and draw in bigger IPOs
The Singapore IPO market is stirring back to life in the last quarter of the year, with a spate of new listings popping up over the past week. Three new Catalist aspirants — Sheffield Green, WinKing Studios and Niks Professional — lodged their draft prospectuses on Sept 28 and 29. They were followed on Oct 2 by the long-awaited business combination of Vertex Technology Acquisition Corp, the first spac listed here, which plans to acquire Taiwan-based live-streaming platform 17Live.
Before these potential listings, the last IPO on the Singapore Exchange S68 (SGX) excluding secondary listings was that of medical supplies firm Pasture Holdings, which was listed on June 9. In between, LYC Medicare Singapore lodged its draft prospectus on June 30 but has yet to launch. In the past few years, several Singapore-based companies have ventured abroad to the US and Hong Kong instead, betting that the supposedly higher valuation these markets offer will outweigh the higher risk that they will fade into oblivion amid the ocean of much larger and more familiar names.
One such stock which decided on Hong Kong is biotech firm Mirxes. The firm, reportedly deemed a unicorn, can trace its roots to Singapore’s Agency for Science Technology and Research. Mirxes is not the first and will not be the last to list overseas. Another was Grab Holdings, which chose to list via a Nasdaq spac despite being backed partly by what is ultimately Singapore’s public money.
The trend has caught wider attention. Among her questions raised on Oct 4, Member of Parliament He Ting Ru asked what were the plans under consideration to encourage local tech companies to choose SGX over other markets, “especially if they have been backed by local agencies during the start-up phase” and also what was being done to attract more investors with risk appetite to invest in start-ups, new IPOs or tech companies currently listed on SGX.
In response, Minister of State Alvin Tan says an “overly presecriptive approach”, if used, may be “at odds” with the listing aspirants’ growth plans.
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Koh Boon Hwee, SGX’s chairman, points out that the capital markets have undergone a big shift in the last 20 years. Stock exchanges are no longer the primary source of funding as there are many private avenues available. “That doesn’t mean we will ignore equity markets,” says Koh, speaking for the first time as chairman of the exchange at its AGM on Oct 5 and sharing the various measures taken to grow the whole market ecosystem here.
Size and familiarity matter
The crop of uninspiring IPOs here needs to be seen in the wider context of a rapid cooling of interest in spacs and a global IPO freeze, which only resumed in recent weeks with the blockbuster Nasdaq listing of chip designer Arm that is soon to be followed by Cainiao Smart Logistics Network in Hong Kong, a spin-off from Alibaba Group Holding.
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Ong Hwee Li, CEO of corporate finance firm SAC Capital, maintains that there is always interest for Asian companies to gravitate to SGX. Over the past two years, secondary listings on the bourse included Emperador from the Philippines; Comba Telecom STC Systems from Hong Kong; Nio, already listed in the US and Hong Kong; and most recently, Malaysia’s TSH Resources. “Besides market sentiment, the timing of an IPO could also be due to the financial year-end and readiness of the companies. Once due diligence and documentation is done, and approval from SGX has been obtained, I believe the companies will proceed with the IPO,” says Ong.
Gary Goh, who blogs at Lone Wolf Investor, is not surprised at the spate of new listings, given how the US Federal Reserve Board has set the tone for rates to be higher for longer. “It might be better to seek a listing and pay back the loans,” says the former remisier. Relative to the global names, the size and profiles of the companies listed here are considerably modest. Investors like Goh will need to get to know them better. “These IPOs seeking listing here are very small companies which I unfortunately don’t hear about,” he explains.
Observers point out that having the IPO pipeline reignited is still good news for the market. If overall sentiment picks up, bigger and more attractive issues might just follow. One such possibility is the long-awaited spinning off and listing of the beer business of Thai Beverage Y92 that has been put on hold.
Different routes to listing
Apart from new listings becoming smaller, there is another noticeable trend. IPOs used to be highly anticipated by retail investors, with long queues at ATMs to apply for new issues remaining a nostalgic memory for some. During the bull market of the 1990s, getting allocated some new IPO shares was like winning the lottery due to the almost certain first-day price jump.
In what was probably a vicious cycle of muted returns and waning retail interest, most of the IPOs launched from the end of 2021 to date have done away with the public tranche. Given the relatively small sum of funds raised, the issue managers and placement agents could easily find enough investors through their private distribution networks. Under SGX rules, Catalist listings must have just 15% of public shares spread among at least 200 shareholders.
Over the past year or so, new listings that have done away with the public tranche include duck rice and bubble tea seller YKGI YK9 ; Pasture Holdings; engineering firm Ever Glory United, testing provider LMS Compliance; the logistics arm spun off from LHN, LHN Logistics; connected devices provider iWow Technology and construction firm Alpina Holdings ZXY .
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As seen from their respective draft prospectuses, WinKing Studios, one of the upcoming new listings, is likely to be all-placement but not Sheffield Green and Niks Professional.
On the other hand, an IPO that stuck by the traditional route was Noontalk Media SEJ , which was launched last October. Besides offering 17.5 million placement shares at 22 cents each, 4.5 million shares were allocated for retail investors. Despite having popular artiste Dasmond Koh at the helm, Noontalk Media’s public offer drew valid applications of just 5.3 million shares.
5E Resources, a Malaysia-based waste management company, did somewhat better. Last April, it placed out 36.5 million shares at 26 cents each and the two million shares offered to the public were 3.5 times subscribed.
Oiltek International, meanwhile, enjoyed an overwhelming subscription rate of 112.9 times for its public tranche at 23 cents each last February. However, this ratio has to be seen in the context that there were only 500,000 public tranche shares available, with the bulk of the issue made up of 22 million placement shares.
Given this growing trend, Goh hopes to see a higher minimum float required of new listings. “If not, IPO is now becoming the acronym for Initial Private Offering,” he says. For IPO managers like SAC’s Ong, the retail tranche indicates the market’s interest in an IPO and, thereby, the valuation it can command. “A good spread of shareholder base will also mitigate the cornering of shares,” says Ong.
Can this current momentum of new listings continue into the new year? The reported listing of Advanced MedTech might be one marker. Chaired by former EDB chairman Philip Yeo, the company, which deals in high-value medical equipment, could reportedly fetch a market cap of $1 billion. If interest is sufficiently strong and can be sustained, more issues might just follow. After all, no one single party can dictate what might happen. “The momentum depends on the overall market,” says Ong.
At the exchange’s AGM on Oct 5, SGX CEO Loh Boon Chye alludes to the cyclical nature of the markets. He acknowledges that the number of new listings has been low across the region. However, there is also the emergence of unicorns in the region that will be prime candidates for listing when they feel that the timing is right. “It is a matter of time before confidence and demand returns,” says Loh. “When the market turns, we want to be ready for that.” — with additional reporting by Jovi Ho
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