IPOS

Nanofilm's listing on SGX could draw tech aspirants, spur greater diversity

NTU spin-off, with Temasek Holdings as substantial shareholder, could raise up to S$510m and be one of the biggest non-Reit listings in years

Singapore

REAL estate investment trusts (Reits) have reigned the Singapore bourse over the years but the potential listing of Nanofilm Technologies could set the stage for initial public offering (IPO) aspirants in the technology space, prompting greater diversity.

This comes as Nanofilm Technologies heads for a mainboard listing on the Singapore Exchange (SGX) with Temasek Holdings as a substantial shareholder.

The Nanyang Technological University (NTU) spin-off company, which specialises in advanced materials and nanoproducts, had on Friday lodged its preliminary prospectus.

A Reuters report cited three sources with knowledge of the matter that the initial public offering (IPO) of Nanofilm could raise up to S$510 million, making it one of the largest non-Reit mainboard listings in recent years here. This would also be the first mainboard listing since March.

The last mainboard listing in Singapore this year was the IPO of United Hampshire US Reit, which raised US$394 million. The last two non-Reit listings on the mainboard, however, was in 2018 where Koufu and PropNex raised S$74.3 million and S$40.9 million respectively. There were no non-Reit mainboard listings in 2019.

Against this backdrop, market watchers The Business Times spoke to said that the successful listing of Nanofilm bodes well for IPO aspirants that are considering to list here.

Tay Hwee Ling, disruptive events assurance leader at Deloitte South-east Asia and Singapore, said: "If Nanofilm commands a good valuation, it would polish the mainboard's image as an incubator for tech unicorns.

"Following Nanofilm's IPO, we can expect more mainboard IPOs to seek listing in the months ahead."

Gail Ong, head of equity capital markets practice at WongPartnership, said: "Companies considering the suitability of an IPO will always be heartened to see successful listings of non-Reit issuers.

"Such listings will provide positive momentum and we expect that there will be several others from diversified industries over the next several months."

One fintech said it is "closely watching" the IPO space, particularly the outcome of Nanofilm's listing.

After all, Nanofilm's upcoming IPO is backed by its strong ties to NTU and Temasek.

"Certainly, Temasek's investment in an IPO does increase the appeal of the IPO and boosts investor confidence," said Deloitte's Ms Tay.

Cornerstone investors had agreed to subscribe for some 104.3 million shares amounting to around S$270 million - taking up more than 50 per cent of the offering.

"That said, established companies of decent size and strengths with longer track record who qualify for mainboard listing, can also carry their own weight in giving confidence to investors," said Ms Tay.

While the local exchange is still far from the likes of the Chinese market or the tech-heavy Nasdaq, there is potential for more tech listings as investors shift away from yield and look towards growth stocks.

This comes as the onset of the Covid-19 pandemic had spurred greater interest in tech stocks.

Tham Tuck Seng, capital markets leader at PwC Singapore said he is optimistic that Singapore's capital markets can benefit from the tech rally given that the Republic has an "excellent tech infrastructure ecosystem and together with its progressive capital markets regulatory regime".

"In the current pandemic, we may see more tech listing aspirants being unearthed given the benefit from continued technology disruption and long term growth in technology spending in areas such as 5G wireless, artificial intelligence, cloud computing, big data and cyber security," he added.

As such, Nanofilm's growth over the years will be extremely attractive for investors looking in the space, said market watchers.

For the first half of 2020, Nanofilm's net profit stood at S$18.5 million, up 62.3 per cent from S$11.4 million a year ago. Revenue for the half year climbed 40.9 per cent to S$77.8 million.

Still, Reits will continue to be the main driver of the Singapore IPO market amid a low interest rate environment that is expected to stay in the short to medium term, said Mr Tham.

There is therefore still work to be done in order to encourage greater diversity and attract larger non-Reit listings.

"Everyone in the listing ecosystem, including the SGX, the relevant regulatory bodies, and professionals such as investment bankers, lawyers and accountants, must continue to invest time to look for high-growth companies for IPO or even work to entice sizeable companies listed on NYSE or Nasdaq to consider dual listing in Singapore," said Mr Tham.

He added that support schemes rolled out by the government to encourage research and development in the tech sector will be a contributor to the development of new economy companies which may eventually seek to IPO.