Groundwork laid, but where are the IPOs?

The same question could be asked of initial public offering (IPO) hopefuls in Singapore today.

Nearly a year ago, The Edge Singapore ran the story How to jumpstart the stock market (June 17, 2024, Issue 1142), which featured several market players weighing in on ways to revive the Singapore market, which had been termed “listless”, “boring” and “undervalued”.

Today, the conditions appear more promising. Since January, trading turnover has increased, with market reforms put forward by a top-level committee being the key reason for the optimism. Blue chips, especially the banks, lifted the Straits Times Index (STI) across 4,000 points on March 28, setting a new record after more than 16 years.

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Terence Wong of Azure Capital: Companies are delisting at a certain price and there is no impetus for them to delist if prices could go up. This does not reflect a bad market. Photo: Albert Chua/The Edge Singapore

When US President Donald Trump played out yet another U-turn episode, initial fears about the impact of tariffs eased. Investors took a breath and stayed invested, especially within Singapore, which has upheld its status as a boring but safe market. As part of the comprehensive measures proposed by the Market Review Committee, rules governing listed companies are being further refined, including the removal of the unpopular Watch-list, seen as the doghouse for underperforming listed companies.

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What got most market participants excited was the proposal for the Monetary Authority of Singapore (MAS) to allocate $5 billion to various fund managers to invest in worthy smaller caps outside the STI, with the clear goal of helping this group of stocks that have suffered disproportionately from a lack of liquidity and trading interest. Presumably, the market will enjoy broader growth and create more self-reinforcing loops of investors willing to pay for companies willing to offer a piece of themselves in exchange for capital for future growth.

Necessary ingredients

Recent moves by SGX and MAS have created “all the necessary ingredients in place” for the bourse to take off, says Rehan Anwer, managing director and co-head of Asia investment banking at Jefferies, which in May became the 44th accredited issue manager here.

Thilan Wickramasinghe of Maybank Securities Singapore: The key question is whether SGX can attract new listings more aligned with its reformation. Photo: Albert Chua/The Edge Singapore

For US-based Jefferies, securing this accreditation enables it to tap Southeast Asia's growth potential. This natural hinterland of Singapore, says Anwer, is growing with a “healthy supply of big and mature companies that can and probably should come to market in the next three to five years”. Besides growth and value, Southeast Asia is a natural destination for capital flowing from capital market activities, he adds.

Felicity Chan, head of Asia syndicate and equity capital markets (ECM) origination, Southeast Asia, at Jefferies, expects a “transformational period” in the next few years. Companies no longer bingeing on low-cost capital are now careful to run more sustainably and they need to tap the public capital markets if they are to grow further or let existing investors cash out.

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“I really believe that we are approaching a very exciting time for Singapore’s capital markets development,” says Pol de Win, SGX’s senior managing director, head of global sales and origination. Together with Anwer and Chan, de Win was also speaking at the SGX-Jefferies Spotlight on High Growth Disruptors Conference held on May 16.

Lorraine Tan of Morningstar: Delistings can be triggered by takeovers and restructurings and are not always caused by persistent undervaluation. Photo: Samuel Isaac Chua/The Edge Singapore

For SGX market strategist Geoff Howie, the Singapore bourse is doing as much as possible to support the secondary market and “get the landscape working in the right way”. He also believes Singaporeans have a “good market” and a “fantastic economy”. On new initiatives, Howie says the bourse will try to emulate what it has done so far with REITs in industrial value chains, which is seeing tailwinds.

Citing the market reforms, various research houses are taking turns to upgrade their views of the local market. In their May 27 report, Adrian Loh and John Cheong of UOB Kay Hian noted that year to date, the STI has outperformed most of the regional peers by between 3 and 16 percentage points. Citing the $5 billion “blitz” and other positive attributes, they see further upside and expect the STI to reach 4,054 points by year-end, up from an earlier forecast of 3,720 points.

Carmen Lee of OCBC Investment Research: Most delistings, she notes, are small- and mid-caps with scant trading interests. Photo: OCBC

On May 22, Morgan Stanley’s Wilson Ng, Derek Chang, Li Aitong and Derrick Kam increased their MSCI Singapore index target by 13% to 2,150 points, implying a 13% upside and a 17% total return in the next 12 months.

In their May 28 report, CGS International’s (CGSI) Lock Mun Yee and Lim Siew Khee alluded to the liquidity boost as a tailwind to “Make Singapore great again”. However, they warn that the “challenging macro environment” with ongoing tariff hikes and trade tensions could temper gains.

Delistings hog the headlines

Yet, despite the renewed optimism, new listings remain few and far between. Since the start of the year, there has been just one IPO, car dealer Vin’s Holdings. Candy maker YLF Group Marketing had lodged its preliminary prospectus but stepped on the brakes when markets went into a few weeks of churn after the US announced universal reciprocal tariffs.

Ong Hwee Li, SAC Capital’s CEO and executive director, feels market watchers should differentiate between privatisations and takeovers. Photo: Albert Chua/The Edge Singapore

To de Win of SGX, the spate of delistings is “part and parcel of a properly functioning capital market” and not necessarily a bad thing. After all, if a publicly traded company is persistently undervalued, its privatisation may yield a better outcome for its shareholders. Delistings also encourage listed companies to make more effort to tell their stories to the market so that investors will accord them a fair valuation. “If you’re properly valued in the public market, you won’t be taken private. So, therefore, these things are quite natural and I think it’s good for the broader functioning of our marketplace,” he says.

David Cheng of OCBC: More delistings are happening because private equity buyers are 'flush with cash' and are looking at attractively valued companies to deploy them. Photo: OCBC

Terence Wong, CEO of Azure Capital, alluding to the growing optimism in the local stock market, believes the delistings are the “storm before the calm”. After all, many of them were already in the process of going private and there is “no reason” for them to halt the process right now. “These companies are delisting at a certain price and there is no impetus for them to delist if prices could go up. It doesn’t reflect a bad market,” he says. “On the contrary, it says that the market is good, which is why they’re in a hurry to delist.”

Thilan Wickramasinghe, head of research at Maybank Securities Singapore, believes the delistings are a “symptom” of SGX’s transition in its regional value proposition, sector specialisations and liquidity. The key question, he says, is whether SGX can attract new listings that are more aligned with its reformation efforts.

Jayden Vantarakis, head of Asean equity research at Macquarie Capital, attributes the “fairly constant” pace of delistings to mergers and acquisitions, private equity buyouts or corporate reorganisations. However, he notes that investors would likely be “more concerned” about whether new IPOs are coming in to replace them.

Robson Lee of Kennedys Law says with quite a few proposed new rules not yet taking effect, listing aspirants prefer to wait for better clarity before proceeding. Photo: Albert Chua/The Edge Singapore

Lorraine Tan, director of equity research (Asia) at Morningstar, agrees that delistings are not unusual and can be triggered by takeovers and restructurings, and are not always caused by persistent undervaluation.

Carmen Lee, head of OCBC Investment Research, similarly sees the trend as part of capital markets worldwide. London saw 88 delistings in 2024 and 18 listings; the number delisted from Tokyo in the first half this year reached a record 59, from 51 last year. Most delistings, she notes, are small- and mid-caps with scant trading interests. They suffer from low valuations, or their controlling shareholders have plans to revamp or restructure the business or re-inject it into other entities.

Companies that announced delistings often say they do not need to raise capital soon as another reason to go private. However, Lee warns the delisting trend will become a “major concern” if even well-traded big- or mid-cap stocks follow suit.

Mark Lee of Asia Fund Space expects at least 30 delistings this year as the business environment remains 'volatile'. Photo: Asia Fund Space

Delisting trend to continue

Shekhar Jaiswal, head of equity research at RHB Bank Singapore, expects delistings to persist in the near future, driven by low liquidity, compressed valuations and the growing attractiveness of private capital. “These conditions make privatisation appealing, especially for undervalued companies,” Jaiswal adds. “Many delisting firms remain fundamentally strong. They are typically profitable, dividend-paying and backed by long-term strategic investors.”

David Cheng, head of corporate finance and global investment banking at OCBC, flags the demand side of this trend: more delistings are happening because private equity buyers are “flush with cash” and are looking at attractively valued companies to deploy them. “Additionally, existing investors may welcome an offer to lower their loss or unlock some gains.”

Art Karoonyavanich of DBS Group Holdings says there is a good mix of REIT IPOs, including data centre, industrial, logistics, hospitality, commercial and retail. Photo: Samuel Isaac Chua/The Edge Singapore

In their separate interviews with The Edge Singapore previously, Jason Saw, group head of investment banking at CGSI, also attributed the delisting trend to readily available private capital. In contrast, Paul Chew, PhillipCapital’s head of research, notes that the delistings are a reflection of the higher valuations in the private market compared to the listed market.

Mark Lee, managing director of Asia Fund Space, expects at least 30 delistings this year as the business environment remains “volatile”. SGX has turned in “impressive” financial results over the last five years, thanks to its “A+” derivatives business. However, the bourse’s equities business gets an “F”.

“The dozens of companies that have announced their delisting intentions have similar characteristics. They did not go to the market to raise funds in the last few years. The market did not give these companies a ‘deserving’ valuation. Hence, it is cheaper to secure financing via debt compared to equity,” he says.

Wayne Lee of W Capital attributes the lack of activity to a lack of confidence from investors. Photo: Samuel Isaac Chua/The Edge Singapore

“SGX’s attractiveness as a platform to fundraise has diminished,” he continues. He adds that delistings will probably magnify from small caps to REITs, an arguably more popular asset class, as they find it more challenging to raise funds.

Ong Hwee Li, SAC Capital’s CEO and executive director, feels market watchers should differentiate between privatisations and takeovers. Companies that became private via acquisitions are okay, as are major shareholders delisting the company for various reasons, such as family planning. In his view, it simply means these companies do not require funding from the capital markets.

Taking a glass-half-full approach, Ong sees the delistings as something positive, as investors may not know that these companies exist without news of their privatisations. After all, “no balling is low balling,” he says, adding that it is normal for offerors to seek “good deals”.

Pipeline of potential IPOs

So, where are the IPOs? Bankers, fund managers, investor relations firms and other dealmakers The Edge Singapore spoke to say they are on their way.

Sighs over the dearth of decent new SGX IPOs have been ongoing for years, but so have rumours and whispers of new listings. In September 2024, Japan’s Nippon Telegraph & Telephone Corporation (NTT) was reportedly considering listing a data centre REIT, which was tipped to happen as early as late 2025. Other possible IPOs include medical company Ultragreen.AI, which is reportedly raising US$400 million ($512.4 million) and whose chairman is former SGX chairman Kwa Chong Seng. In what might be a move to beef up its portfolio and raise awareness before a possible listing, Ultragreen.AI announced on June 17 that it had acquired Perfusion Tech, a Danish clinical software company, for an undisclosed sum.

According to a market insider, Singapore-based but New York-listed Sea’s e-commerce unit, Shopee, is also believed to be evaluating a local listing. Manufacturer Hi-P International was privatised in 2021. Now, backed by a $100 million investment from Temasek sub­sidiary 65 Equity Partners, Hi-P has maintained its intention to list again. Other IPOs are reportedly in the works, with a “few potential ones” expected to lodge their prospectuses before the year ends.

However, the pace of IPO launches, especially interest-rate sensitive REITs, will pick up next year, says Art Karoonyavanich, global head of ECM at DBS Group Holdings. On June 18, the US Fed maintained expectations of another two cuts by end of this year. There is a good mix of REIT IPOs, including data centre, industrial, logistics, hospitality, commercial and retail. He adds that workers’ dormitories and student housing are also among the sectors to watch, as they “generally” have strong business profiles. “It’s probably the first time in a few years where we have a broad base of issuers.”

UOB also has a “healthy” IPO pipeline, says Mark Wee, head of ECM, while OCBC’s Cheng says a few “notable” technology firms and REITs are looking to list.

CGSI, which is said to be bringing in some secondary listings from its home market, China, has highlighted the infrastructure, consumer and healthcare sectors as the ones to watch.

Besides owning the largest market share as a Catalist continuing sponsor, SAC Capital’s Ong also sees a “good” IPO pipeline. This year, his firm is handling the Yangzijiang Financial spin-off, another possible listing, and another two to three listings next year. They span multiple industries: interior design, event organising and co-living. Ong maintains that local companies have always been interested in IPOs, as he has received “a lot” of enquiries.

Mark Liew, CEO and executive director of Prime Partners, is seeing more interest in listings from overseas companies and Singapore-based companies with significant operations overseas, which “bodes well for the future”.

Leon Lim, partner at TSMP Law Corporation, has seen a “swell in demand” from companies mainly in industries with traditionally high investor interest, such as real estate and clean energy. He adds that these companies also tend not to be as exposed to global trade and tariffs.

Azure Capital’s Wong has met four companies keen to list, including those with a “tech slant”, which he feels is something SGX desires as a welcome change from the usual REITs.

Koh Jin Hoe, executive director & head of capital markets, global sales and origination at SGX, confirmed that the bourse is seeing a “strong pipeline” of IPOs in sectors such as tech, healthcare and REITs that are coming to market this year and early next year.

Tangible outcome

Robson Lee, director of Kennedys Law, says that with quite a few proposed new rules not yet taking effect, listing aspirants prefer to wait for better clarity before proceeding. “Some rules require an Act of Parliament to change, which can go past 2025,” he adds. As such, investors should not expect a deluge of listings this year.

“The earliest I expect [IPOs to happen] would be sometime next year. Even if the review committee publishes [its proposals] in September, which is what the industry expects, some of the prohibitions are legislative and will need to be tabled in Parliament,” says Lee.

Lee says he has two clients, both Chinese companies, which are keen to list here as they are drawn by what the $5 billion from MAS can do. One aspires to be another Haidilao, the ubiquitous hotpot chain; the other fancies itself as the next Shein, the online fashion platform. However, Lee warns that if the review group does not adequately address liquidity and valuation issues, his clients may stay put and list in Hong Kong instead. There, the China Securities Regulatory Commission (CSRC) would grant their listing approvals more expeditiously, claims Lee.

TSMP’s Lim agrees, noting that companies are “bearish” on the announced measures and are waiting to see if the measures will eventually improve the market’s liquidity and valuations. Furthermore, some of these companies are not in a hurry to enter public markets since their immediate fundraising needs have been met through private capital.

In addition, certain companies reliant on foreign trade, especially with the US, have shelved their plans “for the foreseeable future” or “at least until the global trade and tariff situation stabilises”.

DBS’s Karoonyavanich believes the shift towards the Hong Kong market, including the large issuances coming to market, was due to investors being “underweight” on Hong Kong and China.

“Investors, in general, have been looking to markets [that are] undervalued, and there’s a natural shift in terms of being underweight to get to better weight, not equal weight,” he explains, adding that because some of these markets are performing relatively well, investors can look at relative value in Southeast Asia.

From the perspective of OCBC’s Cheng, market expectations of falling interest rates would have made a more “conducive” environment for IPOs. However, uncertainties over Trump’s tariffs are “intensifying geopolitical tensions and leading to heightened volatility in the capital markets”. Yet, the equity market development programme (EQDP) has increased investor interest in SGX with share prices of good-quality small- and mid-cap companies performing well on this “potential catalyst”.

To CGSI’s Saw, some IPOs were delayed as the companies involved opted to wait for a better pricing environment and were keeping an eye on the shifting macro conditions. With readily available funding from the private markets, these companies have decided to hold off their listing plans and go through another round of private market funding instead.

Wayne Lee, W Capital’s executive chairman, attributes the lack of activity to a lack of confidence from investors. For example, investors believe there is no guarantee that they will be in the money if they participate in a Catalist IPO. As trading liquidity is not assured, these IPO investors might remain stuck. He says that unnaturally wide bid-ask spreads might ensue, causing an already undervalued IPO to go lower.

Compared to a year ago, listing aspirants are more optimistic. However, they are also waiting to see some tangible impact from the market review, specifically, the impact of the $5 billion from MAS, which remains a work in progress, says Wee. The implementation of this scheme will be “critical”, he adds.

To Karoonyavanich, the $5 billion boost of confidence from MAS will surely help. Details are to be confirmed, but MAS can be relied on to put the money with asset managers who know how to invest. Whether the $5 billion is enough or not, only time will tell.

However, a tangible outcome of the review is that new listings are taking place. “So [the review group] is not only providing confidence, not only providing the shift in mindset … but now I think we’re at the stage where we have to prove that that happens,” says Karoonyavanich.

See also:

• Potential IPO candidates keep their options open


• Streamlined rules and $5 bil will help, but liquidity is key


• Singapore market review ‘very much needed’; slow IPOs due to valuations, says UOB Kay Hian’s Adrian Loh