MAS, SGX must address our IPO problem

[SINGAPORE] Deluge Corporation is an unlikely hero in the story of the Singapore market’s quest for exciting new listings.

For one thing, it operates a seemingly mundane business – it installs and maintains fire detection and protection systems in hospitals, shopping malls and public transportation infrastructure.

More to the point, Deluge has not attempted to price itself like a hot growth stock. Based on the 145 million shares outstanding following its initial public offering at S$0.60 per share, the company has a market cap of only S$87 million – which is 10 times the S$8.7 million in earnings it reported for the financial year to March 2026.

The company said it intends to pay at least one-quarter of its earnings for FY2027 and FY2028 as dividends.

Yet, with high-flying stocks around the world wilting under the pressure of soaring bond yields, it does not hurt to be a moderately priced, dividend-paying, old-school contractor right now.

At its debut on the mainboard of the Singapore Exchange (SGX) on Friday (Oct 16), Deluge’s shares hit a high of S$0.65 before closing at S$0.64 – a 6.7 per cent premium to its IPO price. Only one other issuer that obtained a primary listing in Singapore in conjunction with an IPO this year was above water at the end of last week – EGP Energy Corporation.

There is no certainty that Deluge will remain above its IPO price in the weeks and months ahead, of course. While some new listings this year never traded above their IPO prices, including UI Boustead Reit and JustCo, a number of others popped nicely at their debuts before going into a long downward slide, such as Toku and Kin Global.

Even if Deluge performs well, however, it will probably do little to improve Singapore’s standing as a listing hub – given the company’s relatively small size and the nature of its business, in my view.

Turn to homegrown champions?

The Monetary Authority of Singapore (MAS) and SGX’s goal is not just to have more new listings, but more new listings that draw liquidity to the local market.

Yet, some of the technology-oriented companies that have listed in Singapore in recent years – such as Nanofilm Technologies in 2020, 17Live Group in 2023 and UltraGreen.ai last year – have ultimately left many investors disappointed.

Some market watchers say SGX should perhaps focus on drawing listing aspirants in fields already anchored by homegrown champions.

Singapore’s real estate investment trust (S-Reit) sector would arguably not be what it is today if it were not dominated by well-resourced local sponsor groups. These strong players provided the sector with ballast that prevented the occasional failure of weaker foreign-backed S-Reits derailing local investor sentiment.

Some S-Reits with foreign sponsors are now trying to raise their game in order to win over investors – which could eventually make the sector more diverse and vibrant, in my view.

Earlier this month, the manager of NTT DC Reit proposed to link its performance fee to its distribution per unit growth, replacing the current performance fee based on its net property income.

The manager is also proposing that units issued to pay management fees be priced at net asset value (NAV) per unit instead of prevailing market price when its units are trading at or below NAV per unit.

A deal is also now on the table for Stoneweg Stapled Europe Trust to acquire its sponsor group’s pan-European logistics and light-industrial platform – which manages its 2.3 billion euro (US$2.6 billion) portfolio, as well as a further 820 million euros worth of third-party assets.

Big banks as sector anchors

In a similar fashion, DBS, OCBC and UOB could be the anchors of a dynamic ecosystem of financial services players in the Singapore market.

With their strong operating performance since the pandemic, the three banks have garnered a combined market capitalisation of S$410 billion, and account for nearly 60 per cent of the Straits Times Index. This makes them magnets for global investment flows to Singapore and the rest of the region.

Meanwhile, capital has been pouring into the local digital bank and fintech space too. Global digital banking platform Revolut said earlier this month that it will set up a permanent office in Singapore, and invest S$350 million in the citystate over the next five years.

Fledgling digital financial services players GXS Bank, MariBank and Trust Bank have recently expanded their product offerings in order to deepen their engagement with customers.

Could a listing in Singapore one day make sense for these growth-oriented digital players and their early backers? Could the cash-generating giants such as DBS, OCBC and UOB be useful benchmarks for these emerging players, and vice versa?

Would this provide local investors an avenue to participate in the growth of fintech platforms within the familiarity of their home market, and gradually whet their appetite for fast-growing companies in other fields?

What more could be done to draw promising new listings to the local market?

Ensuring IPOs perform well

The way I see it, in order for Singapore to have a more vibrant IPO scene, companies have to perform well after going public, in the short term as well as the long term.

In particular, as my colleague Benjamin Cher said earlier this year, it is crucial that the first few companies that avail themselves of the SGX-Nasdaq dual listing bridge shine when they debut on the Global Listing Board.

While it is impossible to guarantee that every company will perform well after listing, MAS and SGX may be able to improve the odds of success by closely studying what went wrong for the ones that performed especially poorly.

With a deeper understanding of how the motivations of the various enablers of public listings sometimes lead to poor outcomes, the market regulators may be in a better position to adjust their frameworks and take appropriate enforcement action to ensure that incoming issuers have credible investment stories, and are subjected to a robust price discovery process.

Is there a risk of regulatory heavy-handedness just making things worse? Maybe. But after implementing ambitious initiatives such as the S$6.5 billion Equity Market Development Programme, and the S$30 million Value Unlock scheme, market regulators would be remiss in not taking the next step to see why so many recently listed companies are underwater.

In order to build and entrench its position as a growth capital hub, Singapore needs an IPO ecosystem that supports fast-growing disruptors and cash-generating value stocks alike – and that serves cash-hungry companies and their backers as well as local retail and institutional investors.