NetLink NBN Trust units closed steady at their offer price on Wednesday, although analysts said the muted debut was not a surprise given the large size of the listing and that the outlook for Singapore’s IPO market remained positive.
The city-state has been previously pegged as the likely hot spot for IPOs in Southeast Asia in 2017 with sales of stakes in business and real estate investment trusts (REITs), as volatile currencies and weak investor sentiment curb deals elsewhere.
The $1.7 billion NetLink IPO, the largest in Singapore in four years and which has propelled listings in the country in terms of money raised to a multi-year high, is a shot in the arm for the Singapore Exchange (SGX) that has been trying to attract more big-ticket IPOs.
SGX is encouraged by the larger transactions done for this year and the potential listings due later this year, its head of equities and fixed income, Chew Sutat, said.
“We have already exceeded the total primary and secondary funds raised from last year. Beyond the REITs and business trusts, the consumer and healthcare sectors continue to do well,” he told Reuters.
In recent years, SGX has become an attractive destination for companies to list their global assets by way of REITS or business trusts, as yields of as much as 6-7 percent draw in strong participation from retail and institutional investors amid relatively low interest rates.
Australia’s Cromwell Property Group is aiming to launch a more than $1 billion Singapore REIT IPO later this year and has hired three banks so far, financial sources said.
The REIT will include a portfolio of European offices, industrial and office assets, giving investors access to a large European footprint. Cromwell declined to comment.
Following the NetLink offering, the total amount raised via IPOs in Singapore this year has already hit about $2 billion, Thomson Reuters data shows.
That is more than last year’s $1.7 billion and the highest since at least 2014 when companies raised $2.56 billion.
NetLink, the broadband unit of Singapore Telecommunications (Singtel), had offered 2.9 billion units in its IPO, at S$0.81 apiece, raising about S$2.3 billion.
The offering had been priced at the lower end of its indicative S$0.80-S$0.93 range.
“As a business trust, the future cashflow is predictable, so there is a lack of imagination on this kind of IPO,” said Margaret Yang, a market analyst at CMC Markets, Singapore.
Analysts said the size of the IPO had lowered the possibility of a price surge on the first day.
According to Thomson Reuters data, the NetLink IPO is the biggest since Mapletree Greater China Commercial Trust’s 2013 offering raised $2.06 billion.
NetLink rose to S$0.815 per unit before closing at S$0.810. Singtel owns 24.99 percent ofNetLink after the IPO.
Singapore is a major financial centre but the city-state’s only stock exchange has long experienced low trading volumes and weaker valuations compared with Hong Kong, which in turn has been a deterrent for companies seeking IPOs.
To counter this, the bourse is considering several measures, including looking at whether it should introduce dual-class share listings.