This year, only 29 new listings have come onto the market.
By Chew Xiang 11 October 2008
51, 81, 67, 59, 62 and 29. Not the winning numbers in a Toto variant, just evidence that another kind of ‘lottery’ is rapidly going downhill.
On the stock exchange, the flow of companies listing here since 2003 is coming to a standstill. This year, just 29 companies and trusts have turned to the market, and have raised less than $1.7 billion. Five years ago, despite SARS and the accompanying slowdown, there were 51 firms, the first fruits of the Singapore Exchange’s ambitious project to attract foreign companies.
The numbers have shot up dramatically since - 81 in 2004, 67 the next year, and about 60 a year in 2006 and 2007 - and that’s not including the significant number of secondary listings, new share offerings and funds going to the market in the past few years.
But even more impressive have been the sums raised - the $1.84 billion in 2003 swelled to $7.65 billion last year, helped by Chinese shipbuilder Yangzijiang’s billion-dollar listing in April. Over $13 billion was raised in 2005 and 2006 combined, spawning an impressive pool of issue managers and underwriters, and testimony to the burgeoning depth of the local capital market.
But this year, only four firms have managed to get their hands on more than $100 million - Indiabull Property Investment Trust’s US$193 million IPO, Samko Timber ($110 million), Li Heng Chemical Fibre ($320 million), and Centraland ($122.5 million). Last year, there were 19 which managed the feat, while the companies that listed then also tended to be larger.
So, the rest of 2008 - and most of next year too - looks set to be dull for dealmakers. Investor sentiment has vanished along with stock values around the world. ‘Roadshows have become ‘no-shows’,’ quips Wong Bee Eng, chief executive officer of Provenance Capital.
Investment bankers say the market for new listings is likely to be ‘dead’ for a few months at the least. One says her firm was fortunate that ‘we launched all that we have to launch this year’ before the latest turbulence hit home. ‘It’s dried up a lot since,’ she says. ‘We don’t see much action until next year at least.’
And with every stock market story these days (including this one) focusing on the dearth of new listings, it’s no wonder sentiment is terrible. ‘When you keep repeating bad news, it seems like new bad news,’ says a director at an issue manager.
Unsurprisingly, analysts have been similarly downbeat on prospects for Singapore Exchange stock, which has lost more than half its value from its peak last year. DMG & Partners analyst Leng Seng Choon earlier this week maintained a ‘sell’ call on the counter with a target price of $5.20, still some way below yesterday’s closing price of $5.37.
‘Even though FY08 dividend yield is an attractive 6.3 per cent, we expect FY09 earnings weakness to lead to a much lower 4.7 per cent dividend yield, which is not very attractive considering the high beta of SGX and the current three-month Sibor,’ Mr Leng wrote.
DBS Vickers is even more bearish. Analyst Yeo Kee Yan on Oct 7 issued a technical ‘sell’ recommendation with a fundamental target price of $4.80.
Still, some undaunted companies are starting to submit themselves to the lengthy process of taking themselves public, says Provenance’s Ms Wong. With the process taking six months or more, they are betting that markets will clear up by the second half of next year. She says that much of her listing work has shifted to dealing with companies just starting the whole process, and which would now take their time to get through the hoops.
Meanwhile, the type of work being handled by corporate finance and advisory firms is taking on a classic recession pattern. Ms Wong says her firm is doing more financial advisory work for privatisation deals and takeovers and mergers instead.
Corporate lawyers say they are seeing more restructuring work, although merger and acquisition activity is drying up, as even cash-rich and financially healthy companies turn cautious.
‘We’re seeing quite a lot of restructuring of existing groups that are looking at the situation they find themselves in now, and saying if we change the group’s structure we can do things maybe a bit different, which makes us a bit stronger or reduces our liabilities,’ says Mike Edwards, director of Cains Advocates, an offshore law firm, and who heads its recently set-up Singapore office.
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Public Offerings Tap Running Dry
This year, only 29 new listings have come onto the market.
By Chew Xiang
11 October 2008
51, 81, 67, 59, 62 and 29. Not the winning numbers in a Toto variant, just evidence that another kind of ‘lottery’ is rapidly going downhill.
On the stock exchange, the flow of companies listing here since 2003 is coming to a standstill. This year, just 29 companies and trusts have turned to the market, and have raised less than $1.7 billion. Five years ago, despite SARS and the accompanying slowdown, there were 51 firms, the first fruits of the Singapore Exchange’s ambitious project to attract foreign companies.
The numbers have shot up dramatically since - 81 in 2004, 67 the next year, and about 60 a year in 2006 and 2007 - and that’s not including the significant number of secondary listings, new share offerings and funds going to the market in the past few years.
But even more impressive have been the sums raised - the $1.84 billion in 2003 swelled to $7.65 billion last year, helped by Chinese shipbuilder Yangzijiang’s billion-dollar listing in April. Over $13 billion was raised in 2005 and 2006 combined, spawning an impressive pool of issue managers and underwriters, and testimony to the burgeoning depth of the local capital market.
But this year, only four firms have managed to get their hands on more than $100 million - Indiabull Property Investment Trust’s US$193 million IPO, Samko Timber ($110 million), Li Heng Chemical Fibre ($320 million), and Centraland ($122.5 million). Last year, there were 19 which managed the feat, while the companies that listed then also tended to be larger.
So, the rest of 2008 - and most of next year too - looks set to be dull for dealmakers. Investor sentiment has vanished along with stock values around the world. ‘Roadshows have become ‘no-shows’,’ quips Wong Bee Eng, chief executive officer of Provenance Capital.
Investment bankers say the market for new listings is likely to be ‘dead’ for a few months at the least. One says her firm was fortunate that ‘we launched all that we have to launch this year’ before the latest turbulence hit home. ‘It’s dried up a lot since,’ she says. ‘We don’t see much action until next year at least.’
And with every stock market story these days (including this one) focusing on the dearth of new listings, it’s no wonder sentiment is terrible. ‘When you keep repeating bad news, it seems like new bad news,’ says a director at an issue manager.
Unsurprisingly, analysts have been similarly downbeat on prospects for Singapore Exchange stock, which has lost more than half its value from its peak last year. DMG & Partners analyst Leng Seng Choon earlier this week maintained a ‘sell’ call on the counter with a target price of $5.20, still some way below yesterday’s closing price of $5.37.
‘Even though FY08 dividend yield is an attractive 6.3 per cent, we expect FY09 earnings weakness to lead to a much lower 4.7 per cent dividend yield, which is not very attractive considering the high beta of SGX and the current three-month Sibor,’ Mr Leng wrote.
DBS Vickers is even more bearish. Analyst Yeo Kee Yan on Oct 7 issued a technical ‘sell’ recommendation with a fundamental target price of $4.80.
Still, some undaunted companies are starting to submit themselves to the lengthy process of taking themselves public, says Provenance’s Ms Wong. With the process taking six months or more, they are betting that markets will clear up by the second half of next year. She says that much of her listing work has shifted to dealing with companies just starting the whole process, and which would now take their time to get through the hoops.
Meanwhile, the type of work being handled by corporate finance and advisory firms is taking on a classic recession pattern. Ms Wong says her firm is doing more financial advisory work for privatisation deals and takeovers and mergers instead.
Corporate lawyers say they are seeing more restructuring work, although merger and acquisition activity is drying up, as even cash-rich and financially healthy companies turn cautious.
‘We’re seeing quite a lot of restructuring of existing groups that are looking at the situation they find themselves in now, and saying if we change the group’s structure we can do things maybe a bit different, which makes us a bit stronger or reduces our liabilities,’ says Mike Edwards, director of Cains Advocates, an offshore law firm, and who heads its recently set-up Singapore office.
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