In a year when Singapore’s IPO market lost some of its buzz to Malaysia, a foreign bank also stole the thunder from the local lenders. For managing IPOs across multiple sectors and showcasing a number of different structures, HSBC is IFR Asia’s Singapore Equity House of the Year.
When it comes to running equity capital markets deals, challenging the status quo is no easy task. In Singapore, however, HSBC has emerged as a major player in the IPO market, eating the lunch of the city state’s more established players.
The bank was a bookrunner on four of the six biggest IPOs in Singapore during IFR’s review period, representing sectors as diverse as real estate business trusts, plantations and retail. That is a significant achievement for a bank traditionally viewed as a bond house – and one with a far stronger presence in Hong Kong and China.
HSBC changed this perception with a doubling of its sales force and an expansion of its research team in South-East Asia.
HSBC started the year with the launch of the S$222m (US$182m) IPO of plantation company Bumitama Agri. It was a blow-out, with the institutional portion oversubscribed 31 times, the highest such level for an IPO in Singapore since 2007. Six cornerstone investors took up 42% of the pre-shoe deal size.
The bank also played a lead role in two of the major business trust IPOs from Singapore – Far East Hospitality Trust and Ascendas Hospitality Trust.
Selling REIT and business trust IPOs may appear an easy job in a country that is fast becoming the preferred destination for such instruments in Asia, but Singapore also had its share of failures. M&L REIT pulled its S$509m hospitality IPO in April and Reliance Communications shelved its US$1bn trust float in July after a poor response.
HSBC was joint bookrunner on the US$524m Far East Hospitality Trust IPO – the largest hospitality REIT in Singapore and the largest IPO in the city state in the 12 months. Despite being launched during the holiday month of August, the final book was more than 30x covered with more than 50% of the offering allocated to cornerstone investors.
One of the key goals of the Far East management was to price its REIT IPO at a yield lower than that for listed CDL Hospitality Trust. HSBC and the other bankers duly delivered, pricing the Far East IPO at a 2013 dividend yield of just 6.3%, compared with 6.5% for CDL Hospitality.
The Ascendas Hospitality Trust IPO posed more of a challenge, and was pushed to July from May. The trust also had to scale back the deal about S$60m after dropping one of the hotel assets from its portfolio. Nevertheless, it managed to raise US$305m with the book twice covered.
Both have traded well. As of November 15, Ascendas Hospitality had gained 3.4% from its IPO price, while Far East Hospitality had added 5.4%.
The Courts Asia IPO also proved HSBC’s distribution credentials as it resurrected an issue that had previously failed. In 2010, the furniture and electronics retailer had tried to launch a US$100m IPO in Singapore – through different bookrunners – without success.
However, in October, it raised US$111m from the sale of 178m shares. Cornerstone investors agreed to take up close to 50% of the offer, which was priced at the top of the indicative range of S$0.65–$0.77.
Singapore’s primary equity market took no prisoners this year, with plenty of IPOs being put on hold after premarketing or pulled at the end of bookbuilding, even in the conservative segments of REITs and business trusts. HSBC, however, managed to complete every IPO it launched in the city state, making good use of cornerstones to generate early book coverage.
In addition to new listings, HSBC can also point to repeat business from satisfied clients. In September, the bank was the sole bookrunner on a US$40m 34m-share vendor sale in Parkson Retail Asia, a company’s whose US$111m IPO it managed in 2011.
To see the digital version of this report, please click here.