NetLink's S$2.3b offering a shot in the arm for Singapore IPO market

NetLink's S$2.3b offering a shot in the arm for Singapore IPO market

Biggest IPO in six years is expected to raise about S$2.3 billion in fresh capital. For the whole of 2016, total capital raised was S$2.3 billion; a year before that, it was S$0.5 billion.

File photo of a NetLink Trust van. (Photo: NetLink Trust)

SINGAPORE: Analysts are upbeat about Singapore’s initial public offering (IPO) market in the second half of the year, with the upcoming NetLink NBN Trust IPO expected to bring total capital raised to S$2.8 billion this year.

This will exceed 2016's S$2.3 billion and the S$500 million posted in 2015.

NetLink Trust is the biggest IPO in Singapore in six years and is expected to raise about S$2.3 billion in fresh capital. Last Monday (Jul 10), it announced its IPO price at S$0.81, putting its market capitalisation at about S$3.1 billion. 

NetLink Trust is the fibre broadband business unit of telco SingTel.

Earlier IPOs in Singapore this year include the listing of coffee shop operator Kimly, as well as events production firm UnUsUaL.

Deloitte Singapore’s Dr Ernest Kan said the familiarity of these companies is one reason their IPOs have done well. 

An example is food and beverage company Jumbo Seafood, which was listed in November 2015, and ended its first day of trade with a 36 per cent increase in share price, he said. 

“So that’s another household name, very famous, and people tend to relate to these stocks better,” he said.

Kimly and UnUsUaL are the two best performing stocks among new issues this year, with Kimly up 52 per cent from its initial offer price of S$0.25, and UnUsUaL at more than 150 per cent higher than its offer price of S$0.20 at the close of markets on Jul 14. The majority of the other new counters are also trading above their offer prices.

KGI Securities research analyst Joel Ng said that looking at just the first half of 2017, the higher number of IPOs in the period could be attributed to bullish market sentiment.

“I think what we’re seeing is that the rally in equity markets, people are feeling more bullish, and this is on the back of global recovery in economic growth. There is a subdued concern on trade wars, so that has eased concerns on the global economic growth."

HONG KONG VS SINGAPORE

Despite the strong start, some companies - such as gaming firm Razer - have chosen to list in Hong Kong, Singapore’s closest competitor in the region.

Not too long ago, homegrown Osim International delisted from the Singapore Exchange (SGX) and later sought a relisting on the Hong Kong Stock Exchange as V3.

But the move could simply be business strategy, KGI's Mr Ng pointed out, adding that doing so could mean better access to the greater China market.

“The Hong Kong market has an advantage because they are closer to China, and have a much bigger market in terms of the number of companies they have there,” he said. “Their market capitalisation is at least five times bigger than Singapore’s market, and they also have a deeper liquidity where turnover is five to 10 times bigger than Singapore’s market.”

But Mr Ng and Deloitte’s Dr Kan were quick to point out that Singapore also retains strengths in areas such as real estate investment trusts (REITs) and business trusts.

“The niche of the market depends on the stocks you attract. If I were to pick business trusts and REITs, Singapore is very strong; actually there are 40 REITs and business trusts listed on the SGX compared to about 15 in Hong Kong,” said Dr Kan.

He said at least two more REITs are expected to list in Singapore this year - HNA Commercial Reit and Sinar Mas.

Editor's note: Deloitte has clarified that HNA Commercial Reit, not Hainan Airlines, is expected to list in Singapore this year.

Source: CNA/jp