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Coming: Slew of IPOs as sentiment improves

Second half of year likely to be stronger than first; momentum could carry into 2015

Deloitte chief of operations for clients and markets Ernest Kan said that in the last few months, there have been "quite high" levels of enquiries, and some clients have started "signing off the mandate" - PHOTO: SPH

[SINGAPORE] After a slow start to the year, a sunnier outlook for new listings in the second half of the year will see a swathe of companies raising funds from Singapore investors, and the momentum could carry into 2015.

A notable number of firms across sectors have made enquiries or are kick-starting the initial public offering (IPO) process, said investment bankers, lawyers, audit firms and analysts. There are several mineral, oil and gas companies, particularly explorers and producers, and offshore supply vessel companies.

There are also companies from China, Malaysia and Indonesia, shipping businesses, food and agriculture companies, real estate firms, Singapore companies looking to spin off subsidiaries, and secondary listings.

"Sentiment seems good and positive. We do feel like we're getting a lot of indications of interest," said Gail Ong, head of equity capital markets practice at law firm WongPartnership.

"If all goes well, in terms of good market support globally, the second half could be stronger than the first. We're seeing quite a number of new deals kicking off as well. Typically the IPO process takes six to eight months. It seems like there will be a stream going into Q1 2015," she added.

Deloitte chief of operations for clients and markets Ernest Kan said that in the last few months, there have been "quite high" levels of enquiries, and some clients have started "signing off the mandate".

Deloitte is involved in the largest listing on Singapore Exchange (SGX) this year - Accordia Golf Trust - which raised around S$758 million from investors and will start trading on Friday afternoon. Accordia is a business trust owning golf courses in Japan.

Accordia's listing is expected to drive second-half listings comfortably past the S$1 billion mark. In the first half of the year, close to S$1.37 billion was raised.

After a slow first half, the month of July has seen a flurry of IPOs on SGX, with two mainboard and two Catalist listings raising S$483 million and adding S$2.4 billion to the market capitalisation of companies here.

This is already around half of what SGX saw in the first six months of the year, in terms of numbers and money raised. Two mainboard and six Catalist listings raised S$886 million and added S$4.1 billion in market capitalisation in the first half.

DBS Bank head of capital markets Singapore Tan Jeh Wuan said he is optimistic that the IPO market will be more active in the second half, due to a pipeline built up from deals deferred in the first half.

Issuers had taken advantage of renewed interest recently to complete deals before the summer holidays, when many investors in the West are on vacation, he noted.

Edward Lee, South-east Asia head of equity capital markets at Deutsche Bank, is looking forward to "a number of large transactions" to hit the market in the coming months.

"Singapore and South-east Asia will continue to be areas of interest, and we'll likely see an increase in deal flow in the fourth quarter," he said. "Across the broader Asia region, we expect to see more issuance from technology companies and more activity in the financial institutions space."

Meanwhile, strong suits of SGX such as mineral, oil and gas, shipping and real estate sectors continue to be active, Dr Kan said.

Part of the improved IPO sentiment stems from better market performance. The STI is now up 6 per cent for the year, compared to the beginning of February, when it was down year-to-date by as much as 7 per cent.

Kenneth Ng, CIMB head of equity research, said emerging markets and interest rates are less of a market worry now.

"Also, a low rate environment and a slowdown in China has shifted the investment theme back to Singapore, traditionally deemed as a safe haven and a market with many yield stocks," he pointed out.

Roger Tay, KPMG Singapore's head of capital markets group, said that recent new listings have also boosted sentiment. But whether the good times will last depends on the economic performance of Singapore, US and China and the political stability of neighbouring countries, he added.

From Indonesia, for example, enquiries from issuers have been strong but because of the recent Indonesian elections, many were in a wait-and-see mode. "Whatever is happening at home will affect policy so they will be cautious," noted Dr Kan.

Overall, investors in Catalist offerings this year have been rewarded, according to data compiled by The Business Times.

The best IPO performer thus far this year is cancer specialist Talkmed Group. It is now up 420 per cent from its IPO price. Fellow health company, catheter maker QT Vascular, is up about 80 per cent from its IPO price.

Other outstanding Catalist performers so far are Korean drama producer Spackman Entertainment Group, firearms training facility engineering group Starburst Holdings, and miner Alliance Mineral Assets, which extracts tantalite, a metal used in the electronics industry.