Companies are drawn to markets that offer the best valuations

Singapore

THERE are few tech stocks on the local bourse these days as companies tend to gravitate towards other markets that offer better valuations.

And some industries are better appreciated elsewhere, said Sunningdale Tech's chairman Koh Boon Hwee in an interview with The Business Times.

Homegrown tech firms such as e-commerce group Sea and gaming hardware maker Razer were among those that sought better valuations on overseas markets.

Meanwhile, investors seeking to gain exposure to the tech sector through Singapore stocks typically have to turn to tech manufacturers such as AEM Holdings and Venture Corporation.

As for Sunningdale, Mr Koh said he considers the precision plastic components maker to be a "pure manufacturing" company.

"It just happens that our customers are in tech," he said. "That doesn't make us a tech company with what I call tech multiples," Mr Koh added.

Singapore has, however, been successful in attracting real estate investment trusts (Reits) over the years.

They are expected to continue to anchor Singapore's capital market as the hunt for yield continues amid low interest rates and persistent economic uncertainty from the ongoing pandemic.

There are more Reits listed here than in many places in the world because the Reit market seems to be able to ascribe the proper valuations, said Mr Koh.

While Mr Koh said that there is nothing wrong with an industry dominating a market, it may pose risks to the trading liquidity of other companies that do not have as strong a following.

He cited Sunningdale as an example, saying that it is "very clear" that the liquidity of the stock had been very low over the last five years.

Against this backdrop, he had proposed to take Sunningdale private with Novo Tellus PE Fund 2 in November.

Sunningdale announced last Friday that the scheme to take Sunningdale private had been approved. The last day for trading the mainboard-listed company shares is expected to be March 8, while delisting will take place on April 20.

Low trading liquidity and persistent undervaluation were among key reasons that triggered the recent spate of privatisations here. Share prices were further depressed due to challenges posed by the Covid-19 pandemic.

There were about nine privatisation deals last year, including that of BreadTalk and Perennial Real Estate Holdings.

Notable transactions this year include the proposed privatisation of UK hotel operator GL Limited by GuocoLeisure Holdings, a voluntary conditional cash offer tabled for Penguin International by a consortium with members of its key management as well as AEM's acquisition of contract manufacturer CEI.

On whether the trend of privatisation will continue, Mr Koh said that under the current "new normal", companies may need to consider - at some point in time - if the position they are in is sustainable. This includes whether they are able to restructure in a public environment.

"If your liquidity is really poor, and you have no intention of going back to the market for capital, then you might ask yourself whether you want to remain listed," he said.

Another factor which may deter firms from going public or staying listed is the emergence of alternative ways to raise capital. "In the past, if you wanted money to grow and expand, the only option was actually the public market," he said.

But that is not the case today given the growth of private capital markets, he added.

On whether more should be done to keep homegrown firms listed here, Mr Koh said that the help for local companies should be to ensure that they remain competitive regardless of where they eventually list. The goal should be to grow companies and not to ensure that they list only on the local market, he said.

He is, however, hopeful that the recent success of Nanofilm Technologies' initial public offering could draw more tech aspirants to list in Singapore.