SINGAPORE is headed for its worst year of IPO activity since 2015, with 13 companies raising just S$715 million in gross proceeds from initial public offerings here so far this year.
IPO bankers The Business Times spoke to are not hopeful of getting more deals out the door till next year, so the final tally for 2018 is looking pretty dismal after a blockbuster 2017. Last year, 20 new flotations raised S$4.7 billion in proceeds, including seven mainboard listings.
This year, only three new companies joined the Singapore Exchange mainboard. Sasseur Reit, which operates outlet malls in China, raised S$421.6 million in a March IPO. Food court operator Koufu raised S$74.3 million in July. Real estate agency PropNex raised S$60.1 million in a trading debut on July 2, just three days before the government sprang surprise measures to cool property market euphoria.
Max Loh, EY Asean and Singapore managing partner, said: "All factors point to disappointing IPO deal volumes for 2018."
Except for Koufu, which last traded at its IPO price, and Asian Healthcare Specialists, a Catalist-listed group of orthopaedic doctors which is up 19.6 per cent since its April debut, all of this year's IPO débutantes have left their subscribers swimming in underwater world.
Sandeep Uberoi, head of South-east Asia equity capital market at Bank of America Merrill Lynch, told BT that bankers are waiting to see how the market reacts to the US mid-term elections this week before they execute anything.
"The trade war has also dragged on a bit too long, but deals will happen, I think, in 2019. There is a lot of money to be put to work, but money is also chasing quality transactions. You're not going to see every deal in the market being snapped up," Mr Uberoi said.
An investment banker at a different firm, who declined to be named, told BT: "I think the pipeline for next year is probably a bit better than what it was in 2018, but I don't think it's dramatically better.
"The issues are similar - the kinds of deals coming to the market are mostly real estate-related. Non-real estate deals are few and far between, and all of them are struggling for one reason or another. So let's see. It's not very positive."
In April, two IPO hopefuls dropped plans to list on the mainboard, citing "market volatility". Malaysian healthcare group Qualitas Medical had aimed to raise as much as S$133 million but "pricing was not optimal" despite commitments from anchor investors, it said.
Bangladesh's Summit Power International canned what would have been a US$260 million IPO.
One banker said that a lack of domestic liquidity and market depth means issuers have to lean heavily on international investors and private banking arms for the book-building process, which makes it harder to bring non-Reit IPOs to the market. It is easier for private bank clients to get leverage for yield stocks like Reits, rather than growth plays, the banker added.
Perhaps due to the dearth of bigger deals, local issue managers also gave smaller companies more attention this year, and deal sizes are shrinking.
Since June, Catalist IPOs from timber company Jawala, engineering firm DLF Holdings and car dealership MeGroup have each raised less than S$5 million in gross proceeds.
MeGroup raised all of S$3.8 million, and plans to use S$1.4 million of that to pay for listing expenses. Its offer of 1.5 million shares to the public received exactly 90 valid applications and everyone got at least 1,000 shares.
This year also stands out for the higher number of loss-making early-stage companies that got listed - namely social trading platform Ayondo and e-commerce solutions provider Synagie.
A third company, Cennerv Pharma, lodged a draft prospectus for a Catalist IPO on Sept 19 but has gone quiet since. Cennerv is developing drugs for depression and insomnia, and its two lead drugs are Phase 2 candidates for clinical development. Typically, only about a third of Phase 2 drugs will eventually make it to Phase 3, so Cennerv is no screaming buy, one industry watcher said.
Other deals that remain in the pipeline include KBS Realty Advisors' planned billion-dollar IPO of KBS Prime Reit, which will hold prime commercial properties in the US. Market talk is that Keppel Corp will own a 30 per cent stake in the Reit manager.
Sentiment has turned cautious, however. Keppel-KBS US Reit has lost a third of its value since its debut in November last year, partly due to an ill-advised 295-for-1,000 rights issue last month which resulted in a theoretical ex-rights price of US$0.666 per unit.
India-based drug company Jubilant Life Sciences said in September that it planned to hold exploratory meetings with institutional investors up till Nov 30, in connection with the proposed IPO of its subsidiary Jubilant Pharma. Jubilant was reportedly eyeing a US$500 million IPO with a dual class share structure in Singapore by the year's end.
Both KBS Prime Reit and Jubilant Pharma have pushed their timelines out into 2019, one banker told BT: "Given where markets have moved, every deal right now is being evaluated on a case-by-case basis, because investors are focusing on their own portfolios. It's not a conducive market right now (for IPOs)."
Worldwide, IPO hopefuls of every stripe have been roughed up by a nervous October market. Tencent Music Entertainment Group reportedly paused plans for a US IPO last month.
But not all companies are icing their listing plans.
Homegrown luxury goods marketplace Reebonz plans to list on Nasdaq by the end of 2018 via a reverse merger into Draper Oakwood Technology Acquisition, a special purpose acquisition company (SPAC) that raised US$57.5 million through an IPO last year.
SPACs, or "blank-cheque" companies, are popular with private companies in the US. This listing route is simpler than an IPO, since the money is already in the bank. SPACs are well-audited shell companies that have raised money with the promise of acquiring a shareholder-approved target by a certain time frame.
The implied enterprise value for the combined entity is around US$284 million, Reebonz said in September. Reebonz had reportedly attempted a Nasdaq IPO in 2016.
Meanwhile in Singapore, investment bankers are looking at more mergers and acquisitions deals to survive the boom-and-bust nature of the IPO cycle.
Ding Hock Chai, head of corporate finance at UOB Kay Hian, said: "Companies with strong fundamentals in their core business are on the lookout for good buys. Private equity firms are also waiting on the sidelines, especially if they have managed to raise a good sum in the earlier periods."
On the IPO outlook for 2019, he noted: "Feedback from the ground seems to indicate better sentiments in the later part of 2019 as compared to the earlier half, unless there is a breakthrough on the (US-China) trade tensions. Naturally there are evergreen sectors, like healthcare, education, but these folks need to differentiate themselves in an increasingly crowded market. If the owners are less-sensitive to market timing, or if their expansion plans are urgent enough, they may still choose to proceed at the earlier part of the year."