Singapore snubs foreign IPOs
Equities Summit Power, Qualitas Medical fail to win supportBY S ANURADHAThe poor response to the IPOs
of SUMMIT POWER INTERNATIONAL and
QUALITAS MEDICAL has highlighted
the challenges facing foreign
companies looking to raise
capital in Singapore.
Summit, the first Bangladeshi
company to seek an overseas
listing, and Qualitas, based in
Malaysia, last week deferred
their respective US$260m and
S$100m–$133m (US$77m–
$102m) SGX listings. Summit
blamed the move on market
volatility, and Qualitas said it
was not getting the optimal
price.
The two failures come as
the latest blow for SGX, which
has been looking to broaden
its appeal beyond real estate
investment trusts, which
remain popular with local
investors.
“Institutional investors
find the IPOs too small, while
private banking clients don’t
seem comfortable with the
businesses and dividend yields,”
said one ECM banker.
The prevalence of REIT
listings means Singaporean
investors are accustomed to
higher yields than are available
on growth stocks.
Typically REIT IPOs offer a
distribution yield of 7%–8%.
China’s Sasseur REIT, the only
mainboard SGX listing of the
year, offered a 7.5% yield for
2018.
Although not strictly
comparable, Summit projected
a dividend yield of around 2%,
the banker said.
“Investors are expected to
buy such type of companies
[Summit] for their growth but
private banking clients don’t
understand anything but yield.”
Unsurprisingly, given this
mindset, Summit’s 2018 EV/
Ebitda multiple of 7, at the top
of the range, was not enough
to attract investors. Summit’s
valuation was at a discount to
Thai and Indian independentpower providers that trade in
10x–12x and 9x–10x ranges,
respectively.
Summit would have been
the first overseas IPO from
Bangladesh. It had already
compromised on the size ofthe deal, which was cut from
US$350m indicated during pre-
marketing.
Singaporean investors have
always been wary of foreign
names. US-based Manulife and
Australia’s Cromwell PropertyGroup were only able to
complete their SGX REIT IPOs
on the second attempt.SPECIFIC CONCERNS
Investors also had specific
worries. A Dhaka-based analystsaid, with Bangladesh’s federal
election due later this year,
investors may have been
concerned that a change in
government could adversely
affect the fortunes of the
company.Summit Group founder Aziz
Khan is the brother of Faruk
Khan, a member of the ruling
Awami League party. The
current government is serving
its second term and will be
seeking a third term.
“The prospects of a power
company depend up the large
power projects it is able to win.
And in developing economies
that depends upon political
connections,” the analyst said.
According to the analyst,
foreign equity investors are
more interested in consumer,
bank and telecom companies
which stand to benefit from
Bangladesh’s booming economy
and young population.
“Power is a defensive
sector and has a low chance
of outperforming the broad
market,” he said.
Bangladesh’s GDP grew at
7.3% in 2017, making it the
fastest growing economy in
Asia.News
“Institutional investors find the IPOs too small,
while private banking clients don’t seem
comfortable with the businesses and dividend
yields. Investors are expected to buy such type of
companies [Summit] for their growth but private
banking clients don’t understand anything but
yield.”