SGX eyes billion-dollar Reits, consumer, tech, healthcare IPOs in coming months

Singapore

SINGAPORE Exchange (SGX) is seeing "very healthy" mandates for initial public offers (IPO) in the coming months - including possible billion-dollar Reits.

In addition to real estate investment trusts (Reits), the potential aspirants come from sectors the exchange has been actively marketing to the last couple of years. These include the consumer, healthcare and technology sectors, Chew Sutat, SGX's head of equities and fixed income, told The Business Times (BT) in a recent interview.

"There is talk of more US Reits coming. I would say I am fairly optimistic that there will be billion-dollar Reits from the west listing in Singapore,'' Mr Chew said.

"What we are starting to see and also excited about is the success of the consumer and healthcare sectors and the growth companies that are starting to mirror the regional companies that have market capitalisation north of a billion dollar plus, maybe S$2-3 billion, in pharmaceutical and medical services, that are looking to do transactions on the SGX. The mandates in the IPO market are very healthy,''' he added.

For the full year ended June 2018, SGX saw 22 new equity listings with S$6.2 billion raised - a five-year high - with Reits and infrastructure firms accounting for the bulk. A year ago, there were 23 new listings which raised just S$1.3 billion.

Mr Chew, who is also SGX executive vice-president, said that compared to investing directly in the US, Singapore is seen as an attractive listing venue for US Reits as US investors enjoy better tax advantage returns by investing in a US Reit in a structure in Singapore.

"The accountants have figured appropriate structures and the Reit regime here is recognised. The international investors and US investors are investing in US Reits through Singapore. So, we expect to see more of such transactions coming."

Reits is a sector Mr Chew is extremely proud of. Today, the sector here boasts of an infrastructure that is worth close to S$100 billion in market value, that's almost 10 per cent of Singapore's total market value. More than two-thirds of Reits listed here have assets outside of Singapore, unlike those in the US, Australia and Japan, which are domestic-centric. An investor can expect an average of 6 plus per cent in dividend yield, generated by a diversity of developed and emerging market assets.

He reckoned this is one of the reasons why Singapore has been able to attract new money, not only from private banks and investors here, but from life insurance companies, sovereign wealth funds, institutions in Taiwan, Korea, Japan and China as well as the West.

The technology sector is "starting to bubble up from the bottom", with interest seen from fintech and data analytical companies - very much in keeping with Singapore's Smart Nation push - to list here.

Mr Chew said there has been "a lot of enquiries and some good interest" from companies seeking to list with dual class share structures here.

"But for a listing to materialise, the market has to be in price for both the company to want to come out and investors to want to buy," he said.

Some of SGX's partnerships, notably with Tel Aviv and Nasdaq, are starting to gain traction.

"So we do see a healthy pipeline of Israeli companies as well that are looking to raise capital here."

On whether SGX will be able to attract mega IPOs targeted elsewhere, Mr Chew said: "I would candidly say we don't have the S$50-100 billion companies in our IPO pipeline. In our market today, companies of that size are the likes of Singtel, DBS and Jardine. We don't have mega IPOs.

"Of course, people hope for the one in the Middle-East, but that depends on their own timing and plans," he said, referring to Saudi Aramco's potential IPO.

On SGX's collaboration with Singapore's Infocomm Media Development Authority (IMDA), Mr Chew said that has yielded interesting companies in their growth stage.

"They are going through their private rounds of fund raising, series B, series C. We have good contact with them and have professionals with them in their early stage growth. At some point, they will be ripe for Catalist and the mainboard as well.

"Companies don't immediately become unicorns. Clearly, we have to nurse them," he said.

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