Bangladeshi power producer eyes SGX listing

Whilst the deal is only set to be modestly sized at US$300m, analysts see this as sign of SGX's enduring appeal in luring new Asian listings.

SGX is luring overseas IPOs with its liquidity and track record, competing with China and Hong Kong bourses.

Summit Energy International’s proposed listing on the Singapore Stock Exchange (SGX) looks set to become the first overseas float by a Bangladeshi firm. BMI Research said that whilst the deal is only set to be modestly sized at US$300m, it highlights a key trend in Singapore’s enduring appeal in competition with the likes of Mainland China and Hong Kong for new listings in the Asian arena.

Data from Zephyr, a Bureau van Dijk product, said that IPO activity in the Lion City hit a three-year high last year with 23 floats worth a combined US$2.64b going public on the SGX. “During that period, only one deal valued at US$1b was made, the $1.7b floating of a 75% holding by Singapore Telecommunications in broadband network operator NetLink NBN Trust back in July. Activity levels, however, still remain some way off the $6.15b high recorded across 23 deals during the 2013 full-year period. And the prospects of that record tally being challenged this year are looking increasingly unlikely: just over two months into the year and Singapore is still awaiting the arrival of its first offering, which may well prove to be Summit.”

According to BMI Research, Singapore is an equity capital markets (ecm) arena which has plenty of liquidity and a proven IPO track record to go with it – even if the SGX’s start to 2018 has been largely disappointing. “While we acknowledge that the fortunes of the local IPO market in Singapore have been up and down over recent years, the city-state's tradition for hosting firms with strong ratings will always give it the potential to attract bumper deals and compete with the 'big boys' – such as the Chinese Mainland exchanges of Shanghai and Shenzhen and the offshore resort of Hong Kong - for deals in Asia,” the firm said.

BMI Research noted that with its view on SGX equities broadly positive, there is plenty of upside potential for deals. “According to Bloomberg data correct to March 5, the benchmark FTSE Strait Time Index (STI) has returned just 1.05% since the turn of the year and is sat 13.65% above where it stood a year previously. Such figures suggest that the market’s current growth rate is on a steady and consistent upwards trajectory that will continue to attract further issuers.”

In listing outside of the country, Summit Energy International is trailblazing a path that no other Bangladeshi firm has taken before. “In our view, the firm had little choice but to head offshore in light of the lack of financing options available at home. While development banks are, indeed, taking a central role in project financing, Bangladesh’s power players are exploring alternative means of raising the funds required to support future growth, as displayed by Summit’s move,” BMI Research added.

The firm noted that when put in direct comparison on a purely numbers basis, the difference between Singapore’s and Bangladesh’s ecm is striking. “In the Lion City, the SGX is home to 749 listed companies – according to data from the exchange correct to the end of January 2018. Companies listed in Singapore had a total market capitalisation of $1.07t as of the same date. The SGX Mainboard is the exchange's primary market, accounting for more than 90% of overall market capitalisation and the largest company listed on the exchange is insurer Prudential, which is valued at $86.3b. Meanwhile, on the local DSE (as of the end of December 2017), the Main Board was home to just 302 companies with a combined market capitalisation of BDT3.62b (US$43.86b). On the DSE, the largest listed company is Monno Ceramics Industries, with a market capitalisation of BDT3.78b (US$45.4m).”

The SGX has been suffering from a delisting wave that has been running since 2016 and has shaved off billions in market value from the exchange. But a robust initial public offering (IPO) pipeline in 2018 should help replenish that lost value, according to analysts, with issuers in the Association of Southeast Asian Nations (ASEAN) region leading the way and innovations by SGX giving it an edge over rival platforms.