Reits, Trusts & F&B drive IPOs in SGX 2018

Reits, Trusts & F&B drive IPOs in SGX 2018

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Singapore, 4 Jan 2018 – Apart from real estate investment trusts (Reits) and business trusts (BTs), companies in niche sectors such as food and beverage (F&B) will continue to offer listing aspirants on the Singapore Exchange (SGX).

In a report entitled Equity Capital Markets Watch – Singapore: 2017 Year in Review, PwC said that Reits and BTs would likely continue to be the niche for the SGX.

“The year 2017 was a brilliant one for IPOs (initial public offerings) in Singapore. With the market upturn, we see that real estate investment trusts and business trusts continue to dominate the market making up 88 per cent of total funds raised,” said Tham Tuck Seng, PwC Singapore’s capital markets leader.

Since 2015, SGX has seen eight listings of Reits and BTs, raising a combined S$6.6 billion in gross proceeds and accounting for 85 per cent of the total IPO funds raised over the past three years.

Last year alone, Reits and BTs led the market in terms of proceeds raised. The listing of four Reits and BTs – Dasin Retail Trust, Net Link NBN Trust, Keppel KBS US Reit and Cromwell European Reit – raised S$4.1 billion in proceeds, offering projected yields ranging from 5.7 per cent to 8.5 per cent.

By the end of 2017, there were 48 Reits and BTs listed in Singapore, boasting of a combined market value of S$90.1 billion. Of the 48, 42 are property trusts.

“Notably, all property trusts listed in the past three years have 100 per cent of their investments outside of Singapore. This is an encouraging sign as Singapore continues to remain as a listing destination of choice for overseas real estate players,” PwC said in the report.

The attractive dividend yields offered by these property trusts is their key appeal to investors. For the first nine months of 2017, the average yield of these property trusts was 6.4 per cent, outperforming the MSCI Asia Pacific Reit index which had an average dividend yield of 4.28 per cent.

PwC expects the yield offered by locally listed property trusts to rise this year, with possible upside in the performance for these counters and the expectation of more IPOs coming from property trusts.

“We also foresee higher volume of follow-on activities in 2018 by these listed property trusts as they continue to source for potential acquisition targets,” it added.

SGX may also see more listings of F&B companies this year, given the impressive performance of F&B counters in 2017. Investors too are keen to invest in high performing F&B businesses in part due to the stable cash flow that they generate, the nature of their business model, and their established brand presence. Last year, three F&B companies were listed. Newly listed Kimly, RE&S Holdings and No Signboard Holdings raised some S$90.3 million in total gross proceeds.

However, SGX could face challenges in attracting technology companies to list in Singapore given that rivals including Nasdaq and the New York Stock Exchange offer attractive valuations.

“In addition, SGX is also up against competition from private equity firms and individual investors that offer alternative funding opportunities,” PwC said.

SGX is also expected to face more intense competition from the Hong Kong Stock Exchange (HKEx), which is perceived to offer higher valuations and liquidity. Already, the number of Singapore-based companies listed on the HKEx has more than doubled in the past year to 13 in 2017 from six in 2016. PwC foresees that in 2018, local companies will continue listing on the HKEx.

“Given the improved regional economic sentiment, we foresee fund raising activities across the region are likely to grow and so will competition with bourses from neighbouring economies,” PwC added.

Last year, the SGX saw a total of 20 IPOs, with seven listings on the main board and 13 listings on the Catalist board. At S$4.7 billion, the total funds raised was the highest in four years, doubled the S$2.3 billion raised in 2016.

Samurai 2K Aerosol, a company specialising in high performance aerosol coating solutions, emerged as the top IPO performer in 2017. Its share price rose by 455 per cent to S$1.11 in mid-December 2017 compared to its IPO at 20 Singapore cents a share in January. On Wednesday, Samurai was trading around S$1.04 a share.

In 2017, SGX saw S$3 billion in gross proceeds raised by companies which were already listed, compared with S$3.5 billion in 2016. The latter saw troubled commodity group Noble raising S$675 million from its rights issue.

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