Even a pickup in the second half may not salvage a year that has seen only 3 new listings so far
By LYNETTE KHOO 8 June 2009
(SINGAPORE) This year may mark the lowest trough for initial public offerings (IPOs) here, as high market volatility and depressed valuations have put the brakes on new listings.
So far, there have only been three IPOs this year comprising Teho International, Japan Foods and Westminster Travel, which raised total proceeds of US$12.5 million.
According to data from Thomson Reuters for the past decade, 2002 has been the low point so far, when there were 16 IPOs that raised US$836.6 million between them. In terms of proceeds raised, the trough was 2001 when 19 IPOs raised US$436.3 million.
Going by these measures, 2009 may be the worst year in memory for the IPO market. This has translated to little or no IPO work at all for financial professionals.
For corporate finance houses that find IPO management fees falling off the cliff, ‘the impact has been significant,’ as one director puts it.
Different houses have their own strategies to cope with the downturn, said Mark Liew, corporate finance director at PrimePartners. Some are more involved in secondary fund-raisings and other advisory-related work such as restructuring and mergers and acquisitions.
Auditors say they are less affected by the IPO slump as reporting audit for IPOs makes up only a small part of their overall financial reporting business. Among the Big Four, only PricewaterhouseCoopers has done reporting audit for an IPO - Westminster - so far this year.
The IPO market may start looking up in the second half of this year. There is still a pipeline of companies waiting for the right market conditions to go public.
One issue manager said he will be lodging two to three IPO prospectuses this month. Based on the lodgments with the Monetary Authority of Singapore, there are at least three withdrawn IPOs this year, adding to the pool of ‘ready’ companies.
‘With the stock markets less volatile and companies still requiring capital, I believe that the third and fourth quarters will see more IPOs than the first half of this year,’ said CIMB-GK head of corporate finance Mah Kah Loon.
Brendan Goh, head of corporate finance at DMG & Partners Securities noted that it typically takes two to three months to restart the IPO process, including updating their prospectuses and obtaining approval from SGX.
‘So long as the global economy recovers, stock markets continue to improve, and confidence returns, we should see more IPO launches in the coming months,’ he said.
But any recovery this year is unlikely to lift the IPO market above the lows of 2001-2002.
Industry players noted that there remains a pricing gap in valuations between investors and the companies looking to go public. The recent market rally hardly signals a return in risk appetite for new listings without a public track record.
Investors, burnt by soured investments, will require deeper discounts before they put their money in a new listing with an unproven business and management, said Max Loh, assurance partner and IPO leader at Ernst & Young Singapore.
‘The entire 2009 would not be a good year. We are looking at 2010 to come back to some normalcy,’ he said. Ernst and Young, which did reporting audit for five IPOs in 2008, has not done any so far this year.
Weak corporate earnings may persist for a quarter or two, said Mr. Goh. ‘There are not many sizeable local companies that qualify for a listing on the mainboard.’
All three IPOs this year are listed on Catalist, which does not require a profit track record and allows for a smaller shareholding spread.
But the IPO pipeline hasn’t dried up yet, with issue managers still receiving enquiries from companies both locally as well as from countries such as China and Indonesia.
Ernest Kan, head of IPO at Deloitte & Touche LLP, said some companies in North Asia region, which includes China, Korea and Japan, are keen to tap the South-east Asian market. China remains a key market given its pool of growing companies that are thirsty for funds, he said.
Local firms may be better able to pass muster under regulatory scrutiny after the recent spate of corporate scandals involving foreign listings, one issue manager reckoned.
Companies embarking on the IPO process only now would require some nine to 12 months of preparation before applying to SGX for listing, industry players noted. These could only start streaming in next year.
While the IPO space takes a breather, the stock market is seeing bigger issues in secondary fund-raisings. The total proceeds raised from follow-on issuance on SGX so far this year has increased to US$6.63 billion from US$3.8 billion in a year ago period, though the number of issues fell to 41 from 50.
Industry players noted that the positive market response to recent rights issues is a good sign that market sentiments have improved.
‘If listed companies are able to tap the market again, then hopefully, it’s just a short step away for unlisted companies to be able to raise money,’ Mr. Mah of CIMB-GK said.
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2009 plumbs the depths in barren spell for IPOs
Even a pickup in the second half may not salvage a year that has seen only 3 new listings so far
By LYNETTE KHOO
8 June 2009
(SINGAPORE) This year may mark the lowest trough for initial public offerings (IPOs) here, as high market volatility and depressed valuations have put the brakes on new listings.
So far, there have only been three IPOs this year comprising Teho International, Japan Foods and Westminster Travel, which raised total proceeds of US$12.5 million.
According to data from Thomson Reuters for the past decade, 2002 has been the low point so far, when there were 16 IPOs that raised US$836.6 million between them. In terms of proceeds raised, the trough was 2001 when 19 IPOs raised US$436.3 million.
Going by these measures, 2009 may be the worst year in memory for the IPO market. This has translated to little or no IPO work at all for financial professionals.
For corporate finance houses that find IPO management fees falling off the cliff, ‘the impact has been significant,’ as one director puts it.
Different houses have their own strategies to cope with the downturn, said Mark Liew, corporate finance director at PrimePartners. Some are more involved in secondary fund-raisings and other advisory-related work such as restructuring and mergers and acquisitions.
Auditors say they are less affected by the IPO slump as reporting audit for IPOs makes up only a small part of their overall financial reporting business. Among the Big Four, only PricewaterhouseCoopers has done reporting audit for an IPO - Westminster - so far this year.
The IPO market may start looking up in the second half of this year. There is still a pipeline of companies waiting for the right market conditions to go public.
One issue manager said he will be lodging two to three IPO prospectuses this month. Based on the lodgments with the Monetary Authority of Singapore, there are at least three withdrawn IPOs this year, adding to the pool of ‘ready’ companies.
‘With the stock markets less volatile and companies still requiring capital, I believe that the third and fourth quarters will see more IPOs than the first half of this year,’ said CIMB-GK head of corporate finance Mah Kah Loon.
Brendan Goh, head of corporate finance at DMG & Partners Securities noted that it typically takes two to three months to restart the IPO process, including updating their prospectuses and obtaining approval from SGX.
‘So long as the global economy recovers, stock markets continue to improve, and confidence returns, we should see more IPO launches in the coming months,’ he said.
But any recovery this year is unlikely to lift the IPO market above the lows of 2001-2002.
Industry players noted that there remains a pricing gap in valuations between investors and the companies looking to go public. The recent market rally hardly signals a return in risk appetite for new listings without a public track record.
Investors, burnt by soured investments, will require deeper discounts before they put their money in a new listing with an unproven business and management, said Max Loh, assurance partner and IPO leader at Ernst & Young Singapore.
‘The entire 2009 would not be a good year. We are looking at 2010 to come back to some normalcy,’ he said. Ernst and Young, which did reporting audit for five IPOs in 2008, has not done any so far this year.
Weak corporate earnings may persist for a quarter or two, said Mr. Goh. ‘There are not many sizeable local companies that qualify for a listing on the mainboard.’
All three IPOs this year are listed on Catalist, which does not require a profit track record and allows for a smaller shareholding spread.
But the IPO pipeline hasn’t dried up yet, with issue managers still receiving enquiries from companies both locally as well as from countries such as China and Indonesia.
Ernest Kan, head of IPO at Deloitte & Touche LLP, said some companies in North Asia region, which includes China, Korea and Japan, are keen to tap the South-east Asian market. China remains a key market given its pool of growing companies that are thirsty for funds, he said.
Local firms may be better able to pass muster under regulatory scrutiny after the recent spate of corporate scandals involving foreign listings, one issue manager reckoned.
Companies embarking on the IPO process only now would require some nine to 12 months of preparation before applying to SGX for listing, industry players noted. These could only start streaming in next year.
While the IPO space takes a breather, the stock market is seeing bigger issues in secondary fund-raisings. The total proceeds raised from follow-on issuance on SGX so far this year has increased to US$6.63 billion from US$3.8 billion in a year ago period, though the number of issues fell to 41 from 50.
Industry players noted that the positive market response to recent rights issues is a good sign that market sentiments have improved.
‘If listed companies are able to tap the market again, then hopefully, it’s just a short step away for unlisted companies to be able to raise money,’ Mr. Mah of CIMB-GK said.
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