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Singapore: Things Look Up for New Listings

After a slow year, IPOs could pick up in 2013

Singaporean stocks peaked last Wednesday, with the Straits Times Index (SGX: ^STI) setting a new 5-year high. The index was essentially unchanged last week, however, gaining just 0.2%. Meanwhile, elsewhere in Asia:

 

Weekly Gain

Price-to-Earnings (Feb. 22)*

Nikkei 225

+1.9%

14.8

Hang Seng Index (HKSE: ^HIS)

(2.8%)

13.9

Shanghai Stock Exchange Composite Index

(4.9%)

22.8

BSE Sensex

(0.8%)

17.6

*Normalized earnings per share. Source: S&P Capital IQ  

Last week’s winner

Singapore Technologies Engineering (SGX: S63) was the best-performing stock in the Straits Times Index last week, with a tidy 5.3% gain. This positive momentum followed on from the company’s announcement of strong full-year results the previous Friday. Diluted earnings per share rose 8.5% year-on-year to 18.71 cents and the company even managed to increase its return on equity from 29.9% to a stellar 30.4%.

The shares will no doubt have caught the attention of yield-hungry investors, among others, as ST Engineering announced a special dividend of 9.8 cents per share in addition to the 4 cents per share ordinary dividend (up from the 3 cents per share paid in September.) The dividend yield, currently 3.94%, places the shares in the top quintile of the Straits Index. However, investors should note that the enterprise value (market capitalization plus net debt) is nearly fifteen times EBITDA [Note: EBITDA, or earnings before interest, taxes, depreciation & amortization is a proxy for cashflow.]

New listings: Things are flowing

On Thursday, the Financial Times reported that year-to-date volume in new equity listings in Hong Kong is the highest it has been since 2010 (Hong Kong was the top venue worldwide for initial public offerings in 2009 through 2011.) After a disappointing year in 2012, investor sentiment is improving as individual investors are returning to equities. The article also suggests the Singapore Exchange could play a role in improving the fortunes of Asian equity markets, pointing to Mapletree Investments’ (a unit of Temasek) planned listing of a China-focused real estate investment trust in Singapore in a deal that could raise up to 1.68 billion Singapore dollars. Add that to a market that has been regularly making new 5-year highs and you have a recipe for a virtuous cycle balancing rising investor demand for shares with a rising supply of new issues.

Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead. 

 

This article was written by  Alex Dumortier, CFA . Alex Dumortier is a Fool.com contributor. 

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.