SME confidence drives Singapore’s Catalist board in 2015
Deloitte’s new service offering set to lead SMEs to kick-start fundraising activities
Singapore, 1 December 2015 — Singapore’s small and medium enterprises (SMEs) are abuzz with activity on the local bourse despite a market downturn that saw a dearth of Mainboard listings in 2015. SMEs remained active in backing the Catalist board with 12 new equity listings as of 30 November 2015, raising S$1.49 billion in market cap and S$237 million funds.
“The global economy’s sluggish growth has been largely responsible for the adverse trends in Singapore’s IPO market this year. We started the year with a healthy pipeline of IPOs but the potential growth of this pipeline of floats was held back by lingering problems like the drop in crude oil prices, expectations over interest rate hikes and slowdown of China’s economy,” said Dr Ernest Kan, Deloitte Southeast Asia Leader for Global IFRS and Offerings Services.
“On the bright side of the market, our SMEs are nimble and making positive inroads in the equity market to scale their business for sustainable growth. Five out of 12 Catalist IPOs this year have a market capitalisation of above S$150 million versus two out of 18 in 2014. These five Catalist IPOs qualified as Mainboard candidates too but made an informed decision to list on the secondary board for perceived better market conditions. We have also seen an increase in the number of enquiries from SMEs for both onshore and offshore listings,” shared Dr Kan who is also the Chief of Operations for Clients & Markets at Deloitte Singapore.
Recognising the critical role that SMEs play in economic development, SPRING Singapore and the Singapore Exchange have jointly launched the SPRING-SGX Capabilities Development Grant (“CDG Grant”) to help SMEs enhance their financial frameworks and strategy for access to capital markets to stay resilient and achieve sustainable growth. To further support this initiative, Deloitte has a launched a new service line – “Financial Management Competency Advisory Service Offering for SMEs” – to advise SMEs seeking initial public offerings and other fund raising options.
“For businesses to invest and grow, access to sustainable finance is critical. A buoyant economy must have an adequate supply of finance to support businesses rather than constrain demand and business confidence. The CDG Grant is a timely lifeline for SMEs to plug gaps in their corporate structure, improve the quality of their financial reporting and streamline management control processes,” added Dr Kan.
Responding to the performance of the Singapore IPO market for 2015, Dr Kan expressed deep concerns over the absence of Mainboard listings. “Indeed, 2015 has been a turbulent year for global markets. IPO aspirants and investors have been jolted by waves of economic headwinds in China and other large developing countries. These events have made big ripples in our domestic market and though there is no super pill for cure, it is perhaps time that the industry band together to explore ways to revitalise our equity market.”
Dr Kan led on to share a common feedback by fund raisers. “In our course of advising IPO aspirants, we have observed that getting a good valuation in Singapore is challenging.” Share valuations at IPO, a yardstick typically used by banks to decide how much a company is worth – have remained challenging for some years now versus perceived stronger valuations elsewhere in the region. “If valuation is believed to be a key factor, this tends to draw IPO aspirants’ decision to list in these other countries a more compelling one. That said, Singapore remains an attractive listing destination for both foreign and local companies, viewed as an efficiently regulated marketplace together with the presence of a large community of international fund managers and investors,” added Dr Kan.
Commenting on the outlook for 2016, Dr Kan conveyed his cautious optimism for Singapore’s equity market. “Given China’s continuing economic slowdown, commodity prices expected to remain low, impending interest rate hikes and the increase threats of terrorism in a borderless world, the financial markets will continue to operate in a difficult macroeconomic environment. The global slowdown can be worse but I think there are compensating measures in place like China’s ‘One Belt, One Road’ initiative that will boost business opportunities for Chinese investors into the Southeast Asia market. Our region’s geographic advantage, cultural similarities as well as support from the Association of Southeast Asian Nations (ASEAN) makes it one of the most attractive and active regions for Chinese investors. For companies looking at listing options, it is important to optimise your corporate structure to your business strategy and improve the quality of your financial reporting. That way, you can be better prepared to ride on the wave when the market picks up for fund-raising and public listings.”