Reception for IPOs cooling as market sentiment dives

Poor debuts by recent listings fail to dampen plans by at least five firms to go public soon

THE investing public’s appetite for new listings has turned sour amid the current stock-market turmoil.

But the recent rocky reception for several initial public offerings (IPOs) has not deterred several more firms from making plans to list soon.

Out of seven new listings over the past three weeks, only two issues – those of China telco Sinotel Technologies and Cacola Furniture – are still trading above their offer prices.

The other five, including big offerings such as Lippo-Mapletree Indonesia Retail Trust and China New Town Development, quickly tanked.

Investors who had believed the IPOs were sure bets for quick riches were left licking their wounds.

Still, the current dip in sentiment is unlike the IPO drought in September, when firms delayed their listing plans altogether. This time, a steady stream of IPO hopefuls is seeking public comment by displaying their preliminary prospectuses on the Monetary Authority of Singapore’s Opera website.

Two firms are poised to list on the Singapore Exchange (SGX). Dynamic Colours, which makes compounded resins and packaging materials, debuts on the mainboard today, while ChungHong, a printed circuit board assembly service provider, starts trading next week.

A check with Opera shows there are at least five more firms planning to launch IPOs soon. These include well known names such as curry-puff maker Old Chang Kee and China shipbuilder JES International.

Two business trusts – Hyflux Water Trust and Altitude Aircraft Leasing Trust – are slated to go public too.

This is despite a rapidly weakening risk appetite. The Straits Times Index has fallen by a staggering 493 points, or 13 per cent, in just three weeks – losing two months worth of gains.

Some traders have expressed dismay at the speed at which some recent IPOs have slipped from grace, as their share prices plunged after listing.

‘It is simply incredible. In October, new listings like Marco Polo Marine and China Oilfield were still registering strong double-digit percentage gains. Then came the great bear market for IPOs in November,’ said a local brokerage remisier, Mr Alan Koh.

This should highlight to retail investors the importance of reading an IPO aspirant’s prospectus before they subscribe to its shares.

China New Town, which fell 25.3 per cent from its 83-cent issue price to 62 cents in one week, was hurt by fears it might face delays getting approval from Beijing for a 1.17 billion yuan (S$228.5 million) project.

‘The company had prominently highlighted this concern as a risk factor; yet, few investors paid attention until it was listed,’ said the dealer.

Similarly, those who had read the Lippo-Mapletree Indonesia Retail Trust document carefully would have noticed it was offering 20 million units for public subscription.

While this was a mere fraction of the 645.5 million shares placed out to institutions, the allocation was far bigger than the usual two to three million shares offered to retail IPO investors.

This would have spared punters, who applied for more than one million shares, the anguish of getting a higher-than-expected allocation of 733,000 shares – and losing a staggering $87,960 per person, as the stock dived 15 per cent on its Monday debut.

But Ms Wong Bee Eng, the chief executive of boutique corporate finance firm Provenance Capital, said a listed firm’s lacklustre debut should not be seen as a gauge of future performance.

‘There is a lot of time and effort involved in getting a company listed. Unless market sentiment is so poor that an issue manager is unable to place out all the shares, a company will still go ahead with its listing plan, even if the initial reception may not turn out to be warm.’

Still going ahead

A check with the Monetary Authority of Singapore’s website shows there are at least five more companies planning to launch IPOs soon, including well-known names such as curry-puff maker Old Chang Kee and China shipbuilder JES International.

Two business trusts – Hyflux Water Trust and Altitude Aircraft Leasing Trust – are slated to go public too.

The current dip in sentiment is unlike the IPO drought in September, when companies delayed their listing plans altogether.

This time, a steady stream of IPO hopefuls is seeking public comment by displaying their preliminary prospectuses on the MAS’ Opera website.

Also, two firms are poised to list on the SGX: Dynamic Colours debuts on the mainboard today while ChungHong starts trading next week.

 

Source: The Straits Times 23 Nov 07