Singapore’s IPOs raised more money before markets slump amid COVID-19, virus continues to cloud outlook for the remainder of 2020 has been saved
Singapore’s IPOs raised more money before markets slump amid COVID-19, virus continues to cloud outlook for the remainder of 2020
- Total funds raised in Q1 outperformed the same period last year by 18 times
- Asset owners and fund managers based in Asia Pacific eye potential REITs listing on SGX
SINGAPORE, 6 July 2020 — Singapore’s initial public offerings (IPO) activity remained robust in the first three months of 2020. The market recorded six IPO listings, generating S$725 million in total funds raised and a market capitalisation of S$1.2 billion, according to findings in Deloitte’s mid-year review of the Singapore IPO market. Of the six IPO listings, five took place in Q1 before the unexpected COVID-19 took a heavy toll on the health of the equity market in Q2 where IPO fell to zero during Singapore’s nationwide circuit breaker that lasted from 7 April till 1 June. The capital market saw one IPO listing after the circuit breaker was lifted.
By proceeds, the total funds raised in the first quarter of 2020 outperformed the same period last year by 18 times. The total funds raised in 2020H1 declined 53.2% in the same time frame where IPO activity generated S$1.6 billion in total funds raised from nine IPO listings with a market capitalisation of S$2.2 billion.
Despite the COVID-19 pandemic curtailing companies’ listing debut on the Singapore Exchange (SGX), Real Estate Investment Trusts (REITs) and Business Trusts continued to dominate the market, making up 95.2% of total funds raised in the first half of 2020. This was funded by two REITs listed on the Mainboard – Elite Commercial REIT and United Hampshire US REIT, raising a combined S$690.5 million in gross proceeds. Compared to the first half of 2019, there were two REITs that accounted for 96% of total funds raised with US$1.1 billion (S$1.5 billion) in proceeds as at IPO.
The remaining four IPO listings, all listed on the Catalist, raised a total of S$34.6 million and the gross amount raised by each of them ranged from S$3.0 million to S$19.0 million. During the same period last year, each of the seven IPO listings on the Catalist raised gross amounts ranging from S$3.9 million to S$15.0 million.
“The unprecedented impact of COVID-19 was certainly felt on Singapore’s IPO market just as it had caused volatility in the global market to reach its highest levels since the global financial crisis. Riding on the momentum from 2019Q4, we were looking at a healthy pipeline of listings for 2020 but as the COVID-19 pandemic descended upon the region and the overall decline in the global economy as well as the oil glut and price wars, potential issuers were forced to rethink their timelines and delay their listing plans. Even as the economy goes into post COVID-19 recovery mode, companies will still continue to adopt a prudent approach – monitoring the market and looking for the optimal opportunity to launch their listing plan,” said Ms Tay Hwee Ling, Disruptive Events Assurance Leader, Deloitte Southeast Asia and Singapore.
Notwithstanding the letup in IPO activity during Singapore’s circuit breaker as part of the government’s efforts to curb the further spread of the novel coronavirus; the Singapore bourse welcomed its first New York Stock Exchange (NYSE)-listed company with a dual-class voting structure on its Mainboard. AMTD International Inc. (AMTD), a Hong Kong based financial institution operating in investment banking, asset and strategic management, made its secondary listing debut on SGX’s Mainboard on 8 April by introduction. Upon its listing on the Singapore bourse, AMTD saw an increase in share price on the NYSE by 5.9% to US$9 on the previous close, making this a record high in the first six months of 2020.
With no end in sight, the long-haul reality of the COVID-19 pandemic could be a game-changer for the IPO market. “Potential issuers nevertheless continue to seek new capital and IPOs of companies dealing with essential services might emerge as a response to these opportunities thrown up by the COVID-19 pandemic, giving the IPO market a shot in the arm. They could also consider other capital raising options in the market such as private fund raising but before doing so, it is important for companies to do a stocktake on how their assets may be valued in this new normal compared to half a year ago,” shared Ms Tay.
Market volatility will continue to dominate the IPO market for the remainder of 2020. “Until we see how recovery looks like following the effects of the lock-down measures on the global economy and fiscal stimulus, it is unlikely that Singapore’s IPO market will see a quick rebound in the second half of 2020 though we are seeing companies preparing ahead, exploring IPO readiness support to be geared up for when that window of opportunity opens for them to tap into the market,” said Ms Tay.
“There is still appetite for fundraising in the market. We continue to receive enquiries for potential REIT listing and Catalist listing based in the Asia Pacific region. Companies are waiting for the right time to enter and when this happens is largely dependent on a combination of factors – how well professional parties leverage technology during this Covid period of remote working to complete financial due diligence and IPO preparation work for the listing process, company valuation and how the COVID-19 pandemic will impact their bottom line. Catalist companies need a platform to continue to grow and Mainboard companies tend to focus on valuation. If the price is not right, they are willing to wait. That said, Singapore is better prepared with measures that are implemented to achieve an efficient containment of COVID-19 as well as reducing economic disruptions,” said Ms Tay.
Commenting on the outlook for REITs and Business Trusts, Ms Tay expects to see continuing growth for REITs amid a low interest rate environment, buoyed by new government measures and stimulus packages. REITs is also a resilient asset class that offers investors relatively stable yields which could be a more preferred investment vehicle choice in this challenging economic climate.
“Companies going for IPO need time to prove their potential and position in the market, hence investors should look beyond the short-term effects of COVID-19 and instead, focus on the fundamentals and long-term prospects of an IPO candidate. Those that are in the final stage of IPO preparation are likely to press on with the launch to raise funds from the capital
market to cushion the impact of the challenging business environment,” added Ms Tay.
To support issuers to stay competitive in the new normal, the Singapore Exchange and relevant regulatory authorities have introduced new measures that include granting time extensions and allowing electronic disseminations, along with monetary care packages.
For additional statistics on Singapore’s capital market in the first six months of 2020, please refer to “Singapore IPO market 2020 Mid-Year Report”.
Note to editors:
Unless specified otherwise, all statistics are updated with our analysis as at 3 July 2020.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.
Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax & legal and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organisation”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at www.deloitte.com.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei, Tokyo and Yangon.
© 2020 Deloitte Southeast Asia Ltd