CORDLIFE GROUP ENJOYED a healthy debut on the Singapore Exchange yesterday. It closed its first day of trading at 68 cents, up 37.4% from its offer price of 49.5 cents. The company processes and preserves cord blood and umbilical cord tissue, which are used in transplants and stem cell treatment. It has a 62% market share in Singapore and a 28% in Hong Kong, where it is the second-largest player. It also has a presence in China via a 10% stake in a company called Guangzhou Tianhe Nuoya Biology Engineering Co.
In a recent client note, Maybank Kim Eng Research highlights several positives for the company. Increasing affluence and greater awareness of cord banking services in Asia, for instance, are leading more parents to store the cord blood of their newborns. Customers can opt for a one-time lump sum payment or annual payments till the child reaches maturity at 18 or 21. Maybank Kim Eng says the company should have strong earnings visibility if it can enlarge its subscriber base. The brokerage also likes the company’s “first mover advantage and competitive edge in a growing industry with few participants and low liability risk.”
As one of just a small number of locally-listed healthcare plays, Cordlife is being closely watched by investors. But could it also be a useful barometer for the performance of other IPOs in the months ahead? The company is the first to raise money here this year, but it won’t be the last. Some companies that have lodged preliminary prospectuses recently include Civmec, Global Premium Hotels and Bumitama Agri.
Civmec is an Australian-based construction and engineering company that serves the oil and gas, mining, infrastructure, utilities and chemical industries. Among its customers are BHP Billiton and Rio Tinto, as well as the Gorgon LNG project in Australia. The company’s pre-IPO investors include two daughters of Peter Seah, chairman of DBS Group Holdings, as well as Ang Kong Hua, chairman of Sembcorp Industries.
Global Premium Hotels is the hospitality arm of property developer Fragrance Group. It operates 23 hotels in the “economy-tier to mid-tier” with 1,738 rooms. The company says it intends to add 200 to 300 rooms within the next few years.
Bumitama Agri is an Indonesian oil palm planter that hopes to begin selling crude palm oil in Malaysia this year. It has 119,162ha of planted area, making it similar in size to First Resources, which has 132,251ha of planted area. According to a Bloomberg report, Bumitama Agri plans to sell 297.6 million shares at between 67.5 cents and 74.5 cents each. Cornerstone investors include Wilmar International, Hwang Investment Management and UOB Asset Management.
There appears to be a healthy appetite for IPOs. Cordlife’s offering, for instance, was 3.8 times subscribed. But the company had offered just 60 million new shares. And there are other potentially bigger offerings on the way. Reports are that Ascendas plans an offering of its hotel properties to raise US$750 million ($950 million) in the middle of the year. And Flag Telecom, a unit of India’s Reliance Communications, is said to have applied for an IPO to raise up to US$1.5 billion.
Then, there are the expected offerings of English soccer club Manchester United and gym operator Fitness First, which investors had expected last year but sources say were delayed because of the weak market sentiment. Manchester United was said, last year, to be looking to raise US$1 billion while Fitness First’s offering was expected to be for up to $700 million.
Others that have been talked about are a renminbi-denominated property trust by property trust manager ARA Asset Management, as well as the potential floats of the Formula One racing group, a nickel mining operation of PT Harita Jayaraya, the parent company of Bumitama Agri, and local civil engineering firm Swee Hong Engineering Construction.
Whether or not these IPOs take off – or make it to the final stage of listing at all – will depend a lot on investor reception to the smaller IPOs that have made their intentions known. Meanwhile at SGX, some changes are taking place at the top that could also affect the environment for initial share offerings.
Gan Seow Ann, SGX’s co-president, is resigning after 11 years at the company. Gan, whose role involved, among other things, bringing in IPOs, will stay on as an adviser for now. He will spend time looking at investment opportunities in the emerging markets and setting up advisory panels for the listings, fixed income and commodities businesses.
SGX CEO Magnus Böcker will now take on the role of head of listings. Will that mean bigger and more international listings? After all, Böcker reportedly personally met with officials at Manchester United to convince them to list in Singapore instead of Hong Kong.
Thanks to quantitative easing operations in the west and loose monetary policies in the east, there is a lot of liquidity in the market. And investors are becoming more bullish. It may be too soon to say, given that Cordlife is the first proverbial swallow of the summer. But things certainly look a lot more exciting for investors.
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