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RE&S Holdings closes 41% higher on first trading day

Singapore

SHARES of RE&S Holdings Limited closed on Wednesday - its first day of trading on the Singapore Exchange's Catalist board - at 31 Singapore cents, 40.9 per cent higher than its issue price of 22 cents.

The Japanese food and beverage (F&B) group was among the most active stocks on SGX in early morning trading. It opened 61.4 per cent higher than its issue price at 35.5 Singapore cents. At 9.17am, the stock was trading at 34.5 Singapore cents and some 9.3 million shares had changed hands.

At midday, the stock was trading at 34 cents, hitting an intra-day high of 36.5 cents on Wednesday. A total of about 16.3 million shares worth S$5.6 million were traded.

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In a market update report published on Wednesday by SGX, the local bourse said that there are 13 restaurants and food retail stocks listed with a combined market capitalisation of about S$18.5 billion. Excluding RE&S, some of these stocks include Sheng Siong Group and Jumbo Group. These 13 stocks averaged a total return of 19.1 per cent year-to-date.

RE&S said on Tuesday that it had received "strong interest" from investors for its initial public offering (IPO) of 38 million shares at 22 Singapore cents apiece. A total of 32 million invitation shares were 37.8 times subscribed. The remaining six million reserved shares were fully allocated.

Debut performance

Among institutional investors who had subscribed for the placement shares are Lion Global Investors Ltd, Nikko AM Asia, and Qilin Asset Management Pte Ltd, which have each been allotted 5 per cent of the invitation shares.

Separate from the invitation, sole cornerstone investor Orchid 2 Investments Pte Ltd, which is managed by Temasek Holdings' wholly owned subsidiary Heliconia Capital Management, has subscribed for all 16 million cornerstone shares at 22 Singapore cents apiece. (see amendment)

Last week, PhillipCapital recommended "subscribe" on RE&S's IPO, noting that the stock will trade at a price-to-earnings ratio of 13.7 times post-IPO, which is 13.8 per cent lower than the industry average of 15.9 times. The group has a diversified portfolio with a strong track record of more than 25 years, a wide range of offerings with a multi-price-point strategy, and has a team of experienced management, PhillipCapital said.

However, PhillipCapital cautioned that H1 2018 earnings will not be "rosy" due to factors including downtime costs and equipment write-offs from the reconstruction of Shokutsu Ten food street into a Japanese food alley in Q1 2018, and IPO expenses in Q2 2018, although earnings should "normalise" in H2 2018.

Amendment: An earlier version of this article incorrectly stated that Orchid 2 Investments Pte Ltd subscribed for 16 million cornerstone shares at 0.22 Singapore cents apiece. It had in fact done so at 22 Singapore cents apiece. The article above has been revised to reflect this.

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