Inefficient Singapore IPO market?
By Mano Sabnani, Business and Financial Consultant
First published in TODAY
11-12 Jan 2003

A fund manager contact has just circulated a short report on the IPO market in Singapore, with some interesting, original revelations.

It shows that most of the top performing IPOs since 1999 had actually closed below their IPO offer prices on their first day of trading. And most of them were listed in 2001, which would suggest, superficially, that the quality of IPOs peaked in 2001. In this list are companies like Raffles La Salle, Hyflux, Food Junction, Innovalue Precision, Norelco, Dayen, Qian Hu, J K Yaming, TPV
and Food Empire.

The top first day closing performers since 1999 included Xpress Print (I-One.net), Vicplas, Colex, Media Ring, Flairis, Horizon and PK Tech. Interestingly, not one of these stocks made it to the top ten performing list to date. In fact, their performance since listing has generally been absymal.

Other interesting facts are that of the 187 IPOs since 1999, only 36 are are trading above their IPO prices today. As many as 92 are trading at least 50 per cent below their IPO prices. You could say that half the IPOs are trading at less than half their IPO prices!

There were 66 IPOs who boasted of oversubscription rates of over 30 times. However, except for Dayen, none of these made it to the top ten performers list. IPO managers should take note that oversubscription is not a measure of long term success, says the fund manager.

The ten worst performing IPOs since 1999 were all Internet or IT plays with the exception of Golden Agri, a plantation group based in Indonesia. The worst performing IPO title went to ISoftel, a software company focused on the telecoms industry. Meanwhile, Chartered Semicon had the dubious honour of being the 29th worst IPO since 1999 with STATS at 48th position and Raffles Holding at number 70.

The conclusion is that the IPO market in Singapore is grossly inefficient in pricing. It can therefore be a good hunting ground for value investors who should ignore the hot issues. Ultimately, the top performers will be the overlooked companies who deliver revenue and earnings growth over time.