Singapore IPO market in a slump

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SGXAn Indonesian energy company postponed its initial public offering in Singapore on August 6, in the latest sign of the troubles facing this city state’s stock market.

Singapore Exchange Ltd. is suffering its worst year for IPOs in five years. Weak performances by already-listed shares and low trading volumes are keeping investors away from new offerings, which have raised the least amount in the year to date since 2009.

Only four mid-sized or large new listings have begun trading on the exchange’s main board this year, according to data provider Dealogic. Two are trading below their offering prices and two are little-changed.

The benchmark stock index has performed poorly, gaining just 4.9 per cent so far this year, underperforming its regional peers in Thailand, the Philippines and Indonesia – all of which are up 17 to 18 per cent.

It was this environment that caused Samudra Energy Ltd., an Indonesian oil and gas producer, to delay its IPO, which would have raised as much as $200 million, people familiar with the matter said. The company was worried that the share price would fall after the listing, it said in a statement.

The poor performance of this year’s listings has been largely due to the type of companies coming to market, local investors say. “If you look at some of the business models, they are just not as attractive as we would like,” said Kenneth Tang, a senior portfolio manager for Singapore and Southeast Asia at Nikko Asset Management, which manages $158 billion globally.

Tang, who is keen on companies which can benefit from Singapore’s restructuring efforts or from an external recovery in the global economy, said there are often better prospects for investors in other regional markets such as Hong Kong.

Recent earnings reports reflect the difference. Despite poor trading volumes, Hong Kong Exchanges and Clearing Ltd., which operates the Hong Kong stock exchange, reported a 2 per cent rise in net profit the first half of the year because of boom in new listings that pushed revenue up 4 per cent. Rival Singapore Exchange, meanwhile, said last week that net profit in the quarter ended in June fell 11.6 per cent on weak revenue from its securities segment.

Samudra, which started taking orders from institutional investors late last month, was looking to sell about 131 million shares at 1.89-2.11 Singapore dollars each. The company was due to price the offering on August 5, according to one of the people familiar with the matter.

Samudra is a unit of private-equity firm Northstar Group, which focuses on Indonesia and Southeast Asia. Samudra is the first company to defer a Singapore IPO this year and was to list on Singapore Exchange on August 14.

The relative bright spot in Singapore’s IPO market are real-estate investment trusts and business trusts, which have long been popular in the city-state because of their high yields. The FTSE Straits Times REIT index is up 7.2 per cent in the year-to-date, but the value of trust listings has slumped by more than 50 per cent.

Concerns about higher interest rates globally and Singapore’s property market have cooled interest in trust listings. Analysts warn that the potential gains are limited in the sector, which may put off companies seeking listings in the second half of 2014.

The gains enjoyed by REITs in the second quarter have “given way to under-performance, both against the developers and the broader market,” Citi warned. The bank says REIT performance is increasingly macro-driven “as investors come to the realisation that headwinds abound everywhere one looks.”

Singapore has at least two other IPOs in the pipeline this year, both of which are expected to list this month. IREIT Global, a Singapore-incorporated firm with office assets in Germany, has started taking orders for an IPO that could raise as much as $300 million. Japfa Ltd., an Indonesian poultry and dairy company, seeks to raise as much as $173 million in mid-August.

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Reading Time: 3 minutes

An Indonesian energy company postponed its initial public offering in Singapore on August 6, in the latest sign of the troubles facing this city state’s stock market.

Reading Time: 3 minutes

SGXAn Indonesian energy company postponed its initial public offering in Singapore on August 6, in the latest sign of the troubles facing this city state’s stock market.

Singapore Exchange Ltd. is suffering its worst year for IPOs in five years. Weak performances by already-listed shares and low trading volumes are keeping investors away from new offerings, which have raised the least amount in the year to date since 2009.

Only four mid-sized or large new listings have begun trading on the exchange’s main board this year, according to data provider Dealogic. Two are trading below their offering prices and two are little-changed.

The benchmark stock index has performed poorly, gaining just 4.9 per cent so far this year, underperforming its regional peers in Thailand, the Philippines and Indonesia – all of which are up 17 to 18 per cent.

It was this environment that caused Samudra Energy Ltd., an Indonesian oil and gas producer, to delay its IPO, which would have raised as much as $200 million, people familiar with the matter said. The company was worried that the share price would fall after the listing, it said in a statement.

The poor performance of this year’s listings has been largely due to the type of companies coming to market, local investors say. “If you look at some of the business models, they are just not as attractive as we would like,” said Kenneth Tang, a senior portfolio manager for Singapore and Southeast Asia at Nikko Asset Management, which manages $158 billion globally.

Tang, who is keen on companies which can benefit from Singapore’s restructuring efforts or from an external recovery in the global economy, said there are often better prospects for investors in other regional markets such as Hong Kong.

Recent earnings reports reflect the difference. Despite poor trading volumes, Hong Kong Exchanges and Clearing Ltd., which operates the Hong Kong stock exchange, reported a 2 per cent rise in net profit the first half of the year because of boom in new listings that pushed revenue up 4 per cent. Rival Singapore Exchange, meanwhile, said last week that net profit in the quarter ended in June fell 11.6 per cent on weak revenue from its securities segment.

Samudra, which started taking orders from institutional investors late last month, was looking to sell about 131 million shares at 1.89-2.11 Singapore dollars each. The company was due to price the offering on August 5, according to one of the people familiar with the matter.

Samudra is a unit of private-equity firm Northstar Group, which focuses on Indonesia and Southeast Asia. Samudra is the first company to defer a Singapore IPO this year and was to list on Singapore Exchange on August 14.

The relative bright spot in Singapore’s IPO market are real-estate investment trusts and business trusts, which have long been popular in the city-state because of their high yields. The FTSE Straits Times REIT index is up 7.2 per cent in the year-to-date, but the value of trust listings has slumped by more than 50 per cent.

Concerns about higher interest rates globally and Singapore’s property market have cooled interest in trust listings. Analysts warn that the potential gains are limited in the sector, which may put off companies seeking listings in the second half of 2014.

The gains enjoyed by REITs in the second quarter have “given way to under-performance, both against the developers and the broader market,” Citi warned. The bank says REIT performance is increasingly macro-driven “as investors come to the realisation that headwinds abound everywhere one looks.”

Singapore has at least two other IPOs in the pipeline this year, both of which are expected to list this month. IREIT Global, a Singapore-incorporated firm with office assets in Germany, has started taking orders for an IPO that could raise as much as $300 million. Japfa Ltd., an Indonesian poultry and dairy company, seeks to raise as much as $173 million in mid-August.

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