Real estate and healthcare IPOs to drive Singapore’s equity market in second half of 2018

Singapore’s initial public offering (IPO) activity posted strong results in the first six months of 2018. According to data released by Deloitte Singapore, funds raised from IPOs on the Singapore Exchange (SGX) hit S$548 million in proceeds from seven IPOs. This makes an 18% increase in funds raised compared to the first six months of 2017 where nine IPOs raised S$464 million in proceeds. As at 30 June 2018, there was also one registration and three lodgements on the SGX.

Of the seven, six company IPOs on the Catalist raised S$126 million and one Real Estate Investment Trust (REIT) on the SGX Mainboard accounted for 77% of total funds raised, at S$422 million in proceeds as at IPO.

Responding to the performance of the Singapore IPO market for 2018 H1, Ms Tay Hwee Ling, Global IFRS & Offerings Services Leader, Deloitte Singapore, said: “The real estate sector was the main driver for fund raising activity on SGX in the first half of 2018, with Sasseur REIT and SLB Development Ltd raising S$422 million and S$55 million respectively, collectively accounting for 87% of total IPO proceeds.

We are also seeing a bullish trend in the healthcare industry. In the last five years, healthcare IPOs have shown an increasing price earnings ratio on listing. The post-offering performance of healthcare IPOs has remained strong with an average 24.5% share price return after going public.”

“If you look at the key exchanges in the region, there have been a period-on-period decrease in 2018 H1. The Shanghai Stock Exchange had 37 IPOs in 2018 H1 which raised RMB 64.8 billion, resulting in a 70% decline from the 120 IPOs which raised RMB 76.7 billion in 2017 H1, due to a fall in listing approvals. The Hong Kong Stock Exchange (HKEx) saw a 8.6% fall in funds raised, despite seeing a 44.1% increase in the number of IPOs from 68 to 98. In this comparative landscape, SGX’s domestic IPO activity and performance has remained stable and strong,” added Hwee Ling.

That said, Singapore’s equity market would need more blockbuster listings in 2018 H2 in order to keep up with the IPO market performance in 2017. As a well-established capital market in Asia Pacific, SGX remains a preferred international exchange for listing as evidenced by the large proportion of foreign listings on SGX – there were 45 Singapore companies and 40 foreign companies that listed on SGX in the past five years.

In that same period, foreign companies that listed on SGX from developed countries such as Australia, Europe, United States of America, Japan and in recent years, China, typically raised between three to seven times more funds when compared to Singapore counterparts.

In 2018 H1, Singapore companies that sought listing on the HKEx increased more than two-fold, from three (2017 H1) to seven (2018 H1). Singapore-based construction companies continue to show a preference for a listing on the HKEx, with 10 out of the 12 local domiciled construction companies choosing the HKEx in the past five years.

Expressing her confidence on the outlook of the Singapore IPO market for the remaining part of 2018, Hwee Ling said: “At Deloitte, we expect to see a continuing healthy pipeline of domestic and cross border IPOs in spite of global uncertainties in relation to the escalating trade tensions between US with China, Europe and Canada. With the introduction of dual-class shares structures, SGX is now in a position to support high-growth companies and attract blockbuster listings from around the world, while broadening investment options for investors and adding to the vibrancy of Singapore’s capital market. We are cautiously optimistic that Singapore’s IPO market will continue to do well in 2018 H2.”