Monday, March 4, 2013

IPO Troubles in Trust-Heavy Singapore

05 Mar 2013 06:31 MPST WSJ BLOG: IPO Troubles in Trust-Heavy Singapore
(This story has been posted on The Wall Street Journal Online's Deal Journal blog at
By Chun Han Wong and P.R. Venkat

Singapore's listings scene is roaring back to life with a $1.3 billion initial public offering by a China-focused real-estate investment trust. But nontrust-related IPOs continue to elude the city-state, even as neighboring bourses are gearing up for a range of billion-dollar deals.

Elsewhere in Southeast Asia, companies from retailers to infrastructure firms are poised to cash in on rapid economic growth by launching large IPOs and secondary share sales. Singapore, despite its push to rival Hong Kong as an Asian listing hub, has a one-dimensional listings scene: It hasn't hosted any major nontrust IPOs since 2010.

Its largest listing in two years--set for a Thursday debut--is a $1.3 billion China-focused REIT IPO by Mapletree Investments Pte. Ltd., the real-estate arm of Singaporean state investor Temasek Holdings Pte. Ltd.

"The supply of IPOs is relatively low as the global economy is still weak...Competition [for IPOs] will intensify with other countries given that they are growing faster," said Ken Ang, an investment analyst at Philip Securities.

Thailand, which reported 6.4% economic growth last year, will host BTS Group Holdings PCL's proposed $1.5 billion flotation for its elevated-train system in Bangkok. Over in Malaysia, where the economy expanded 5.6% in 2012, power company Malakoff Corp. Bhd. has plans for a $1 billion IPO. In Singapore, the government expects the economy to grow by 1% to 3% this year after a 1.3% expansion in 2012.

Singapore has relied on REITs and business trusts to try to keep up with Hong Kong, the top global IPO destination from 2009 to 2011. Trust listings contributed more than half of the IPO proceeds in Singapore in the last five years and surged to 93% in 2011, when the city hosted its largest-ever IPO Hutchison Port Holdings Trust's $5.5 billion flotation.

This trend is set to continue this year. Apart from Mapletree Overseas Union Enterprise, a Singapore-based developer of mainly offices and hotels, could initiate an $800 million hospitality REIT IPO in the third quarter, while fellow developer Soilbuild is planning an industrial property REIT that could raise about $400 million, according to people with knowledge of these deals.

Although Singapore has a large, diversified investor pool and tough corporate-governance rules, it has lost out to neighboring governments' measures to deepen their capital markets.

Backed by the government's push to list huge state-owned entities, Malaysia hosted $7.5 billion worth of IPOs in 2012, placing it fifth globally in terms of value after coming in 14th in 2011, according to data tracker Dealogic.

Bankers say some $3 billion worth of IPOs could be launched in Kuala Lumpur this year, including deals by Malakoff and port-owner Westports Malaysia Sdn. Bhd. In Indonesia, private-equity firm CVC Capital Partners plans to sell up to $1.5 billion worth of shares in Matahari Department Store.

Things could have been very different for Singapore, which saw some $5 billion worth of IPOs pulled last year because of volatile markets and weak demand. U.K. soccer club Manchester United ditched plans to list in the city-state, motor-sport group Formula One shelved a $2.5 billion flotation, and India's Reliance Communications scrapped a listing of up to $1 billion of its undersea-cable assets, among others.

Bankers say some of these IPO plans could be revived if Mapletree's latest REIT listing goes well. But even so, Singapore's IPO scene will likely remain trust heavy.

"Singapore was an early adopter of REIT and business trust legislation and the asset class has proved itself to be popular with a wide variety of individual and institutional investors," said Rupert Mitchell Citigroup's Asia-Pacific head of equity syndicate. "The sector's strong yield characteristics have played well in a low-interest-rate environment."

Although REITs have won loyal followers thanks to steady yields, business trusts have been shunned by some investors because most have underperformed the market. Singapore hosts 30 REITs and property trusts with about $44 billion in total market value, a record since the government set up a legal framework for REITs in 1999.

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